Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation
Introduction
This management's discussion and analysis of financial conditions and results of operations is intended to assist you in understanding the Company's past performance, financial condition and prospects. A detailed discussion of fiscal 2025 year-over-year changes can be found below and a detailed discussion of fiscal 2024 year-over-year changes can be found in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Overview of Business
Graphic Packaging is a leading global provider of consumer goods packaging made from renewable or recycled materials. The Company designs and manufactures sustainable packaging solutions including cartons, multipack cartons, trays, carriers and paperboard canisters, as well as cups and bowls, made primarily from recycled paperboard, unbleached paperboard and bleached paperboard. Paperboard used in its packaging solutions comes from wood fiber, a renewable resource, and from recovered (reused) fiber. Graphic Packaging's consumer packaging is designed to be recycled, and the Company works across the value chain to make it easier for people to recycle. With this focus, the Company plays an active role in support of the move to a more circular economy and a sustainable future for generations to come. Graphic Packaging's commitment to reducing the environmental impact of everyday consumer packaging is fundamental to the Company's strategy, goals and business purpose.
The Company serves a wide variety of consumer markets, from food and beverage, to foodservice, household products, beauty and heath care. Graphic Packaging produces packaging solutions at over 100 locations in 20 countries around the world, serving customers and brands ranging from local to multinational consumer products companies and retailers. The Company offers one of the most comprehensive ranges of packaging design, manufacturing and execution capabilities available. Graphic Packaging manufactures a significant amount of the paperboard that it uses to produce packaging solutions, primarily where it believes that self-manufacture provides it with a competitive advantage and allows the Company to deliver better, more consistent results for customers. The Company currently manufactures most of the paperboard it consumes in the Americas and purchases the majority of the paperboard it consumes in its International Paperboard Packaging operations from third parties.
Graphic Packaging works closely with its customers to understand their needs and goals and to create new and innovative designs customized to their specific needs. The Company's approach serves to build and strengthen long-term relationships with purchasing, brand management, marketing and other key customer functions. The Company is organized to bring the full resources of its global and local innovation, design and manufacturing capabilities to all of its customers with the goal of delivering packaging solutions that are more circular, more functional and more convenient.
The Company competes with a wide range of packaging companies whose primary raw materials are paperboard, plastic, multi-layer laminates, shrink film, paper, corrugated board, bio-based materials and other packaging materials. While circularity and sustainability are increasingly important to customers' purchase decisions, the Company also competes on the basis of product innovation, price and execution capabilities. Many of the Company's multi-year supply contracts include terms which provide for the pass through of certain costs including raw materials, energy, labor and other manufacturing costs with the intention of reducing exposure to the volatility of these costs, many of which are outside of the Company's control.
The Company is implementing strategies to (i) develop and market innovative packaging products and applications that benefit from consumer-led sustainability trends; (ii) expand market share in its current markets and to identify and penetrate new markets; (iii) capitalize on the Company's customer relationships, business competencies and manufacturing facilities; and (iv) continue to reduce costs and drive productivity through 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. Graphic Packaging cannot predict with any certainty the impact that rising interest rates, a global or regional recession or higher inflation may have on its customers or suppliers. Additionally, it is unable to predict the potential effects that any future pandemic or other global health emergency, widespread military and geopolitical conflicts, or other social and political unrest or change, including in Eastern Europe, Africa and the Middle East and related sanctions or market disruptions, may have on its business.
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Acquisitions and Dispositions
• In May 2025, the Company closed its Middletown, Ohio, recycled paperboard manufacturing facility.
• In December 2025, the Company closed its East Angus, Québec, recycled paperboard manufacturing facility.
• In May 2024, the Company completed the sale of its Augusta, Georgia bleached paperboard manufacturing facility (the "Augusta Divestiture") to Clearwater Paper Corporation for a total consideration of $711 million.
• During 2024 and 2023, the Company decided to close multiple packaging facilities. Production from these facilities has been consolidated into other existing packaging facilities. Current Assets on the Consolidated Balance Sheet include $8 million and $15 million relating to multiple paperboard manufacturing and packaging facilities that met the held for sale criteria as of December 31, 2025 and 2024, respectively.
• In January 2023, the Company completed the acquisition of Tama Paperboard, LLC ("Tama"), a recycled paperboard manufacturing facility located in Tama, Iowa, from Greif Packaging LLC for approximately $100 million. Tama is reported within Corporate and Other. Subsequently, in the second quarter of 2023, the Company closed this facility.
• In September 2023, the Company completed the acquisition of Bell Incorporated ("Bell"), adding three packaging facilities in Sioux Falls, South Dakota and Groveport, Ohio for $262 million. Bell is reported within the Americas Paperboard Packaging reportable segment.
• During the third quarter of 2023, the Company decided to discontinue the project in Texarkana to modify an existing paperboard machine to add swing capacity between bleached and unbleached paperboard in order to focus growth investments in the strategic expansion of recycled paperboard capacity.
• During the third quarter of 2023, the Company announced its decision to permanently decommission the K3 recycled paperboard machine in Kalamazoo, Michigan as part of its recycled paperboard network optimization plan that the Company initiated in 2019. As of December 31, 2024, the Company has completed the decommissioning of the K3 recycled paperboard machine.
• During the fourth quarter of 2023, the Company completed the sale of its two packaging facilities in Russia for total consideration of $67 million. The Company incurred $10 million of impairment losses associated with these facilities, which is included in the Business Combinations, Exit Activities and Other Special Items, Net line in the Consolidated Statement of Operations.
Results of Operations
Year Ended December 31,
In millions
Net Sales
Income from Operations
Nonoperating Pension and Postretirement Benefit 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
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2025 Compared to 2024
Net Sales
The components of the change in Net Sales are as follows:
Year Ended December 31,
Variances
In millions
Price/ Volume/ Mix
Exchange
Decrease
Percent Change
Consolidated
The Company's Net Sales in 2025 decreased by $190 million or (2)%, to $8,617 million from $8,807 million for the same period in 2024 due to the Augusta divestiture in 2024, and reduced open market paperboard volumes and pricing of bleached paperboard and lower pricing, partially offset by favorable foreign currency exchange of $57 million. Packaging volumes were flat. Innovation sales growth was $213 million, driven by conversions to the Company's sustainable consumer packaging solutions. There were higher packaging sales in the health and beauty market, while packaging sales in the food, beverage, foodservice and household markets were relatively flat.
Income from Operations
Income from Operations for 2025 decreased $315 million or (28)%, to $804 million from $1,119 million for the same period in 2024, due to lower packaging price and volume-related decreases, the Augusta Divestiture in 2024 (which included a gain of $75 million) and related bleached paperboard price and volume declines ($30 million), commodity inflation (including logistics, energy, and purchased materials, partially offset by secondary fiber) of $47 million and other inflation (primarily labor and benefits) of $106 million, partially offset by savings from continuous improvement and other programs and productivity improvements and a $10 million favorable foreign currency exchange. Income from Operations was also favorably impacted by a reduction in accelerated depreciation of $9 million related to the closures of several packaging and paperboard manufacturing facilities (refer to Note 18. Exit Activities in the Notes to Consolidated Financial Statements for additional information), and by the weather and power issues in 2024 that did not recur in 2025. Excluding the gain from the Augusta Divestiture in 2024, Income from Operations was impacted by a reduction in charges for Business Combinations, Exit Activities and Other Special Items of $39 million. See Note 1. Business Combinations, Exit Activities and Other Special Items, Net in the Notes to Consolidated Financial Statements.
Interest Expense, Net
Interest Expense, Net was $220 million and $230 million in 2025 and 2024, respectively. Interest Expense, Net decreased primarily due to an increase in capitalized interest primarily due to the Waco project. The Company capitalized interest of $52 million and $34 million in 2025 and 2024, respectively. As of December 31, 2025, approximately 28% of the Company's total debt was subject to floating interest rates.
Income Tax Expense
During 2025 and 2024, the Company recognized Income Tax Expense of $139 million and $229 million, respectively, on Income before Income Taxes of $582 million and $886 million, respectively.
The effective tax rate for 2025 is different from the statutory rate primarily due to the impact of state taxes and non-deductible expenses, as well as tax benefits of $8 million related to U.S. federal income tax credits.
The effective tax rate for 2024 was different from the statutory rate primarily due to the write off of non-deductible book goodwill associated with the Augusta divestiture as well as tax benefits of $16 million related to U.S. federal, state and foreign income tax credits, including purchased tax credits.
Equity Income of Unconsolidated Entity
Equity Income of Unconsolidated Entity was $1 million in 2025 and less than $1 million in 2024 and is related to the Company's equity investment in the Rengo Riverwood Packaging, Ltd. joint venture.
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Segment Reporting
During the first quarter of 2025, the Company realigned its financial reporting structure under two reportable segments, Americas Paperboard Packaging and International Paperboard Packaging. This structure aligns with how the Chief Operating Decision Maker ("CODM") measures segment operating results, allocates resources among the segments and assesses segment performance.
The Company's reportable segments are described as follows:
Americas Paperboard Packaging includes paperboard packaging sold primarily to consumer packaged goods ("CPG") companies serving the food, beverage and consumer product markets and cups, lids and food containers sold primarily to foodservice companies and quick-service restaurants in the Americas.
International Paperboard Packaging includes paperboard packaging sold primarily to CPG companies serving the food, beverage and consumer product markets, including healthcare and beauty, primarily in Europe.
The Company allocates internally sourced paperboard margin and corporate costs to the reportable segments to appropriately represent the economics of these segments. The Corporate and Other caption, which does not meet the criteria of a reportable segment, includes the unallocated corporate costs and the Paperboard Manufacturing operating segment. The effect of intercompany transfers to the paperboard packaging segments has been eliminated from the Corporate and Other caption to reflect the economics of the integration of these segments.
The Company's CODM evaluates each segment based primarily on Income from Operations. 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.
Year Ended December 31,
In millions
Net Sales:
Americas Paperboard Packaging
International Paperboard Packaging
Corporate/Other/Eliminations (a)
Total
Income (Loss) from Operations:
Americas Paperboard Packaging (b)(c)
International Paperboard Packaging (c)(d)(e)
Corporate and Other (b)(c)(f)
Total
(a) Includes revenue from the sale of paperboard to third parties.
(b) Includes accelerated depreciation related to exit activities in 2025, 2024 and 2023. See Note 18. Exit Activities in the Notes to Consolidated Financial Statements for further information.
(c) Includes expenses related to business combinations, exit activities and other special items in 2025, 2024 and 2023. See Note 1. Business Combinations, Exit Activities and Other Special Items, Net in the Notes to Consolidated Financial Statements for further information.
(d) Includes impairment charges related to Russia in 2023. See Note 19. Divestitures in the Notes to Consolidated Financial Statements for further information.
(e) Includes accelerated depreciation related to exit activities in 2024. See Note 18. Exit Activities in the Notes to Consolidated Financial Statements for further information.
(f) Includes gain from Augusta Divestiture in 2024. See Note 19. Divestitures in the Notes to Consolidated Financial Statements for further information.
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2025 Compared to 2024
Americas Paperboard Packaging
Net Sales decreased due to lower pricing, lower packaging volumes and unfavorable foreign currency exchange, partially offset by innovation sales growth driven by conversions to the Company's sustainable consumer packaging solutions. Packaging sales were lower in the food, beverage and household markets, while packaging sales in the foodservice market were relatively flat.
Income from Operations decreased due to lower pricing, lower packaging volumes and higher commodity cost and other inflation (primarily labor and benefits), partially offset by net performance, including cost savings from continuous improvement and other programs and productivity improvements. Income from Operations was also favorably impacted by reductions in accelerated depreciation and charges related to the closures of several packaging facilities (refer to Note 18. Exit Activities in the Notes to Consolidated Financial Statements for additional information) and by the weather and power issues in 2024 that did not recur in 2025.
International Paperboard Packaging
Net Sales increased due to innovation sales growth driven by conversions to the Company's sustainable consumer packaging solutions, higher packaging volumes and favorable foreign currency exchange, partially offset by lower pricing and mix. Packaging sales were higher in the food, foodservice, household, health and beauty and beverage markets.
Income from Operations decreased due to lower pricing and commodity inflation and other inflation (primarily labor and benefits), partially offset by higher packaging volumes and cost savings from continuous improvement and other programs, including benefits from capital projects and productivity improvements. The impact of foreign currency exchange was relatively flat.
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 those assets that are no longer required to meet existing strategic and financial objectives into cash. Therefore, liquidity cannot be considered separately from capital resources that consist of current or potentially available funds for use in achieving long-range business objectives and meeting debt service commitments.
Cash Flows
Years Ended December 31,
In millions
Net Cash Provided by Operating Activities
Net Cash Used in Investing Activities
Net Cash Used in Financing Activities
Net cash provided by operating activities in 2025 totaled $841 million, compared to $840 million in 2024. The increase was primarily due to a decrease in payments for income taxes, partially offset by the decrease in income from operations in 2025 as compared to 2024. Pension contributions in 2025 and 2024 were $11 million and $12 million, respectively.
Net cash used in investing activities in 2025 totaled $732 million, compared to $342 million in 2024. The Company had capital spending of $922 million ($803 million was capitalized of which $737 million was for adding capacity and improving process capabilities, $32 million for capital spares and $34 million for manufacturing packaging machinery) and $1,203 million ($1,256 million was capitalized) in 2025 and 2024, respectively. The elevated levels of capital spending were driven by the construction of the Company's new recycled paperboard manufacturing facility in Waco, Texas. For more information on the construction of the new recycled paperboard manufacturing facility in Waco, Texas, and continued investments made as part of the integration of acquisitions, see Note 18. Exit Activities in the Notes to Consolidated Financial Statements. Net cash receipts related to the accounts receivable securitization and sale programs were $171 million and $152 million in 2025 and 2024, respectively. In the prior year the Company completed the Augusta Divestiture for total cash consideration of $711 million. For further discussion of the Augusta Divestiture, see Note 19. Divestitures in the Notes to Consolidated Financial Statements.
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Net cash used in financing activities in 2025 totaled $18 million compared to $489 million in 2024. Current year financing activities included the Company completing a $100 million tax-exempt green bond transaction on May 29, 2025 through Mission Economic Development Corporation's Private Activity Bond Program (the "Green Bonds"). The net proceeds of $99 million were used to fund a portion of the construction of the Company's new recycled paperboard manufacturing facility in Waco, Texas. For more information on the Green Bonds, see Note 5. Debt in the Notes to Consolidated Financial Statements. Current year activities also include borrowings under revolving credit facilities primarily for capital spending, repurchase of common stock of $150 million and payments on debt of $14 million. The Company also paid dividends of $128 million and withheld $34 million of restricted stock units to satisfy tax withholding obligations related to the payout of restricted stock units. Prior year financing activities included a debt drawing of the new incremental term facilities which consist of a $50 million Incremental Term A-5 Facility, a $200 million Incremental Term A-6 Facility, an offering of $500 million aggregate principal amount of 6.375% Senior Unsecured Notes due 2032. The net proceeds were used by the Company to repay a portion of the outstanding borrowings under its senior secured revolving credit facility. The Company also drew $400 million from the senior secured domestic revolving credit facilities and used the proceeds, together with cash on hand, to redeem it's 0.821% Senior Notes due in 2024. The Company also drew $300 million from the senior secured domestic revolving credit facilities on August 14, 2024 and used the proceeds to redeem its 4.125% Senior Notes due in 2024. For further discussion of the Company's newly acquired debt and redemptions, see Note 5. Debt in the Notes to Consolidated Financial Statements. Other prior year activities include borrowings under revolving credit facilities primarily for capital spending, repurchase of common stock of $200 million and payments on debt of $23 million. The Company also paid dividends of $122 million and withheld $25 million of restricted stock units to tax withholding obligations related to the payout of restricted stock units.
Supplemental Guarantor Financial Information
As discussed in Note 5. Debt in the Notes to Consolidated Financial Statements, the Senior Notes issued by Graphic Packaging International, LLC ("GPIL") are guaranteed by Graphic Packaging International Partners, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company ("GPIP") and certain domestic subsidiaries (the "Subsidiary Guarantors"), which consist of all material 100% owned subsidiaries of GPIL other than its foreign subsidiaries and foreign subsidiary holding companies (collectively "the Guarantors"). GPIL's remaining subsidiaries (the "Nonguarantor Subsidiaries") include all of GPIL's foreign subsidiaries, foreign subsidiary holding companies and immaterial domestic subsidiaries. The Subsidiary Guarantors are jointly and severally, fully and unconditionally liable under the guarantees.
Because GPHC and GPIP have no independent assets or operations other than ownership of GPIL, the results of operations, assets and liabilities for GPHC and GPIL are substantially the same. The summarized financial information below is presented on a combined basis, consisting of the Issuer (GPIL) and Subsidiary Guarantors, and is presented after the elimination of: (i) intercompany transactions and balances among the Issuer and Subsidiary Guarantors, and (ii) equity in earnings from and investments in the Nonguarantor Subsidiaries.
In millions
Year Ended December 31, 2025
Summarized Statements of Operations
Net Sales (a)
Cost of Sales
Income from Operations
Net Income
(a) Includes Net Sales to Nonguarantor Subsidiaries of $631 million.
In millions
December 31, 2025
Summarized Balance Sheet
Current assets (excluding intercompany receivable from Nonguarantors)
Noncurrent assets
Intercompany receivables from Nonguarantors
Current liabilities
Noncurrent liabilities
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Liquidity and Capital Resources
The Company expects its material cash requirements for the next twelve months will be for: capital spending, periodic required income tax payments, periodic interest and debt service payments on associated debt (refer to Note 5. Debt in the Notes to Consolidated Financial Statements for additional information), lease agreements which have fixed lease payment obligations (refer to Note 6. Leases in the Notes to Consolidated Financial Statements for additional information), and minimum purchase commitments (refer to Note 13. Commitments in the Notes to Consolidated Financial Statements for additional information) along with ongoing operating costs, working capital, share repurchases and dividend payments. The Company expects its primary sources of liquidity to be cash flows from sales and operating activities in the normal course of operations and availability from its revolving credit facilities, as needed. The Company expects that these sources will be sufficient to fund its ongoing cash requirements for the foreseeable future, including at least the next twelve months.
Principal and interest payments under the term loan facilities and the revolving credit facilities, together with principal and interest payments on the Company's 4.00% Green Bonds due 2026, 5.00% Green Bonds due 2030, 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, 3.75% Senior Notes due 2030 and 6.375% Senior Notes due 2032 (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 spending 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, reasonable and supportable forecasts of future economic conditions and the creditworthiness of customers. Receivables are charged to the allowance when determined to be no longer collectible.
The Company engages with third-party financial institutions to sell certain trade accounts receivable from customers. Transfers under these agreements meet the requirements to be accounted for as sales of receivables in accordance with the Transfers and Servicing topic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (the "Codification"). The receivables sold are reflected as a reduction of accounts receivable on the Consolidated Balance Sheets at the time of sale. The corresponding proceeds are reflected in Cash Flows from Operating Activities within the Consolidated Statements of Cash Flows. Receivables related to the Company's European program are sold in exchange for cash and a Beneficial Interest, therefore, a portion of the proceeds are reflected as "Beneficial Interest on Sold Receivables" and "Beneficial Interest Obtained in Exchange for Proceeds" in Cash Flows from Investing Activities within the Consolidated Statements of Cash Flows. The loss on sale for all programs is included in Other Expense, Net in the Consolidated Statements of Operations. The following table summarizes the activity under these programs for the years ended December 31, 2025 and 2024:
Year Ended December 31,
In millions
Receivables Sold and Derecognized
Proceeds Collected on Behalf of Financial Institutions
Net Proceeds Received from Financial Institutions
Deferred Purchase Price at December 31 (a)
Pledged Receivables at December 31
(a) Included in Other Current Assets on the Consolidated Balance Sheets and represents a beneficial interest in the receivables sold to the financial institutions, which is a Level 3 fair value measure.
Receivables sold under all programs subject to continuing involvement, which consists principally of collection services, were $814 million and $778 million as of December 31, 2025 and 2024, respectively.
The Company also participates in supply chain financing arrangements offered by certain customers that qualify for sale accounting in accordance with the Transfers and Servicing topic of the FASB Codification. As of December 31, 2025 and 2024, the Company sold receivables of $1,138 million and $1,104 million, respectively, related to these arrangements.
The fees associated with the sale of receivables for all programs were $57 million and $64 million as of December 31, 2025 and 2024, respectively, and are included in Other Expense, Net in the Consolidated Statements of Operations.
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The Company has arranged a supplier finance program ("SFP") with a financial intermediary, which provides certain suppliers the option to be paid by the financial intermediary earlier than the due date on the applicable invoice. The transactions are at the sole discretion of both the suppliers and financial institution, and the Company is not a party to the agreements and has no economic interest in the supplier's decision to sell a receivable. The range of payment terms negotiated by the Company with its suppliers is consistent, irrespective of whether a supplier participates in the program. The agreement with the financial intermediary does not require the Company to provide assets pledged as security or other forms of guarantees for the SFP. Amounts due to the Company's suppliers that elected to participate in the SFP are included in Accounts Payable on the Company's Consolidated Balance Sheets and payments made under the SFP are reflected in Cash Flows from Operating Activities in the Consolidated Statements of Cash Flows.
The activity of the Company's outstanding obligations confirmed as valid under its SFP for the years ended December 31, 2025 and 2024, is as follows:
Year Ended December 31,
In millions
Confirmed Obligations Outstanding at the Beginning of the Year
Invoices Confirmed During the Year
Confirmed Invoices Paid During the Year
Confirmed Obligations Outstanding at the End of the Year
Non-cash additions to Property, Plant and Equipment, Net included within Accounts Payable on the Company's Consolidated Balance Sheets were $79 million, $198 million and $145 million as of December 31, 2025, 2024 and 2023, respectively.
Covenant Restrictions
Covenants contained in the Company's Fifth Amended and Restated Credit Agreement (the "Current Credit Agreement") and the Indentures may, among other things, limit the Company's ability to incur additional indebtedness, 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, as well as 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 requires that the Company maintain a maximum Consolidated Total Leverage Ratio of less than 4.25 to 1.00. At December 31, 2025, the Company was in compliance with such covenant and the ratio was 3.63 to 1.00. The Company must also comply with a minimum Consolidated Interest Expense Ratio of 3.00 to 1.00. At December 31, 2025, the Company was in compliance with such covenant and the ratio was 6.33 to 1.00.
On February 26, 2026, the Current Credit Agreement was amended to increase the maximum Consolidated Total Leverage Ratio from March 31, 2026 to December 31, 2026 to 5.00 to 1.00 and from March 31, 2027 to June 30, 2027 to 4.75 to 1.00. The Amendment also incorporates an additional pricing tier when the Consolidated Total Leverage Ratio is greater than or equal to 4.75 to 1.00; limits share repurchases to $65 million on an annual basis; and places additional restrictions on acquisitions and investments in non-guarantor subsidiaries during the period commencing on February 26, 2026 and ending on September 30, 2027.
As of December 31, 2025, 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.
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. 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.
For further discussion of the Company's environmental matters, see Note 14. Environmental and Legal Matters in the Notes to Consolidated Financial Statements.
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International Operations
The Company has packaging facilities in 20 countries outside of the U.S. and sells its products worldwide. For 2025, before intercompany eliminations, net sales from operations outside of the U.S. represented approximately 31% of the Company's net sales. The Company's revenues from export sales fluctuate with changes in foreign currency exchange rates. In addition, at December 31, 2025, approximately 27% 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 gain of $196 million, which was recorded in Other Comprehensive Income (Loss) for the year ended December 31, 2025. 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 previously 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 2025. 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 has used interest rate swaps to manage interest rate risks on future interest payments caused by interest rate changes on its variable rate term loan facility. The Company does not hold or issue financial instruments for trading purposes. See Item 7A, Quantitative and Qualitative Disclosure About Market Risk for additional information.
Off-Balance Sheet Arrangements
The Company had $38 million of standby letters of credit issued under a separate unsecured facility as of December 31, 2025 as disclosed in Note 5. Debt in the Notes to Consolidated Financial Statements. The Company does not have any other off-balance sheet arrangements.
Critical Accounting Judgment and 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 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 future cash flows associated with impairment testing for goodwill and long-lived assets, and deferred income taxes.
Goodwill
The Company evaluates goodwill for 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. As of October 1, 2025, the Company had five reporting units, four of which had goodwill.
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. The Company performed a quantitative impairment test as of October 1, 2025 for each of its reporting units. The impairment evaluation 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. The estimated fair value of each reporting unit is determined by utilizing a 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 earnings before interest, taxes, depreciation and amortization ("EBITDA"). If the carrying amount of a reporting unit exceeds its estimated fair value, goodwill is considered impaired.
In determining fair value, management considers a number of factors in developing our forecasts of future cash flows, including but not limited to, projections of revenues and EBITDA margins, changes in working capital, capital expenditures and discount rates, and market data and analysis, including EBITDA exit multiples. These 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 used to estimate the reporting unit fair value and the related analysis of potential goodwill impairment.
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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. Due to a decrease in our stock price and market capitalization in 2025, the estimated fair values of our reporting units have also decreased compared to prior year. 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.
As a result of its annual quantitative impairment test, the Company concluded that all reporting units with goodwill have a fair value that exceeded their carrying value, and thus goodwill was not impaired. The Company had goodwill totaling $2,065 million as of December 31, 2025, of which $939 million, $84 million, $497 million and $545 million is related to the Americas, Foodservice, Paperboard Manufacturing and International reporting units, respectively. Excess fair value over carrying value was approximately 2% for the International reporting unit and 18% for the Foodservice reporting unit. No other reporting units had excess fair value over carrying value below 20%. The discount rate used for each reporting unit was 8% and the Company utilized EBITDA multiples ranging from 6.0 to 9.0 times to calculate terminal period cash flows.
A material change in the fair value or carrying value of our International, Foodservice or Paperboard Manufacturing reporting units may result in impairment of the reporting units. For example, our ability to achieve our projected revenues and targeted EBITDA margins are key assumptions in our estimated future cash flows. If our actual experience in future years falls significantly below our current projections, the fair value of the reporting units could be negatively impacted. Similarly, an increase in interest rates would lower our discounted cash flows and negatively impact the fair value of the reporting units. A decline in the market price of our common stock, resulting in a decrease in our market capitalization may indicate a decline in the fair value of individual reporting units. We believe our projections and assumptions are reasonable based on current market conditions, past performance and other factors but it is possible they could change, impacting our fair value estimate, or the carrying value could change.
If we had changed the assumptions used to estimate the fair value of our International and Foodservice reporting units, which have carrying values of $2,127 million and $877 million, respectively, the impact of these isolated changes, which are reasonably possible to occur, would have led to the following fair value exceeding or being (below) the fair value of these reporting units:
Discount Rate
EBITDA Exit Multiple
EBITDA Margin
100-Basis-Points
100-Basis-Points
Increase
Decrease
Increase
Decrease
Increase
Decrease
International Reporting Unit:
% by which fair value exceeds/(below) carrying amount
Foodservice Reporting Unit:
% by which fair value exceeds carrying amount
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 pre-tax book earnings, income tax strategies and forecasted earnings for the entities in each jurisdiction.
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As of December 31, 2025, the Company has a valuation allowance of $62 million against its net deferred tax assets in certain foreign jurisdictions and against domestic deferred tax assets related to certain federal and state tax credit carryforwards. As of December 31, 2024, a total valuation allowance of $45 million was recorded.
As of December 31, 2025, 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 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. The Company determined that no deferred tax liability should be recorded related to the outside basis difference of its Canadian subsidiary as of December 31, 2025.
The Company has not provided for deferred U.S. income taxes on outside basis differences in its other international subsidiaries because of the Company's intention to indefinitely reinvest its earnings outside the U.S. The determination of the amount of the unrecognized deferred income tax liability (primarily withholding tax in certain jurisdictions) 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 a 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.
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