GRAPHIC PACKAGING HOLDING CO
For the period ended Dec 31, 2024. Filed Feb 12, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 12, 2025
GPK$11.19-3.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-21.
0001408075-24-000012
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-12.
0001408075-25-000007
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 143 previous paragraphs and 110 current paragraphs.
57 unchanged; 36 reworded; 15 added; 46 removed; 4 previous and 2 current paragraphs rearranged.
Tables are not compared: 9 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
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, paperboard canisters, and cups and bowls, made primarily from unbleached paperboard, recycled paperboard, and bleached paperboard. Paperboard used in its packaging solutions comes from wood fiber, a renewable resource, and from secondary (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 our strategy, our goals, and to our business purpose.
Current report
The Company serves a wide variety of consumer markets, from food and beverage, to foodservice, household products, beauty and heath care. We produce packaging solutions at over 100 locations in over 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, manufacture, and execution capabilities available. Graphic Packaging manufactures a significant amount of the paperboard that it uses to produce packaging solutions, mainly 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 from third parties the majority of the paperboard it consumes in its Europe Paperboard Packaging operations.
Current report
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.
Current report
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.
Current report
•On May 1, 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.
Current report
The Company's Net Sales in 2024 decreased by $621 million or 6.6%, to $8,807 million from $9,428 million for the same period in 2023, due to the Augusta divestiture and reduced open market paperboard volumes and pricing of bleached paperboard, lower packaging volumes, pricing declines, including pass through of lower input costs in Europe, the divestiture of our two packaging facilities in Russia in 2023 ($92 million) and unfavorable foreign currency exchange ($24 million), partially offset by the acquisition of Bell in September 2023 ($118 million). Innovation sales growth was $205 million driven by conversions to our sustainable consumer packaging solutions. Lower packaging sales in food, household, and health and beauty markets were partially offset by higher packaging sales in foodservice and beverage markets.
Current report
Income from Operations for 2024 decreased $55 million or 5%, to $1,119 million from $1,174 million for the same period in 2023, primarily due to the Augusta Divestiture and bleached paperboard price and volume declines, weather, power and equipment maintenance issues of $30 million and incremental planned maintenance expense and market downtime, offset by the gain from the Augusta divestiture of $75 million. Excluding those items, the negative impact of lower pricing and lower packaging volumes, non-commodity (primarily labor and benefits) cost inflation and foreign currency exchange, were offset by performance, including cost savings from continuous improvement and other programs, and productivity improvements, including benefits from capital projects, innovation sales growth, favorable commodity deflation (primarily external board and energy, partially offset by secondary fiber and byproducts) and the acquisition of Bell in September 2023. Income from Operations was also favorably impacted by a reduction in impairment charges related to the sale of our Russian operations in 2023 (refer to “Note 19 - Divestitures” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for additional information), a reduction in accelerated depreciation related to the closures of several packaging and paperboard manufacturing facilities of $36 million, and a reduction in charges related to the discontinuation of the Texarkana swing capacity project (refer to “Note 18 - Exit Activities” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for additional information).
Current report
(f)Includes accelerated depreciation related to exit activities in 2024, 2023, and 2022. See “Note 18 - Exit Activities” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for further information.
Current report
(g)Includes gain from Augusta Divestiture in 2024. See “Note 19 - Divestitures” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for further information.
Current report
Net Sales decreased due to lower pricing and packaging volumes, partially offset by innovation sales growth driven by conversions to our sustainable consumer packaging solutions, and the acquisition of Bell in September 2023. Lower packaging sales in food and household markets were partially offset by higher packaging sales in the foodservice market.
Current report
Income from Operations decreased due to lower pricing and packaging volumes, higher levels of planned maintenance and market downtime, weather and power issues and commodity inflation (primarily secondary fiber and byproducts, partially offset by energy, wood and chemicals) and other inflation (primarily labor and benefits). These decreases were partially offset by performance, including cost savings from continuous improvement and other programs, and productivity improvements, including benefits from capital projects, innovation sales growth, and the acquisition of Bell in September 2023. 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 included herein under “Item 8., Financial Statements and Supplementary Data” for additional information).
Current report
Net Sales decreased due to lower pricing, predominantly due to pass through of lower input costs, the divestiture of our two packaging facilities in Russia in 2023 and unfavorable foreign currency exchange, partially offset by innovation sales growth driven by conversions to our sustainable consumer packaging solutions and higher volumes. Lower packaging sales in food, health and beauty, and household markets were partially offset by higher packaging sales in the beverage market.
Current report
Income from Operations decreased due to lower pricing and accelerated depreciation and charges related to the closure of packaging facilities (refer to “Note 18 - Exit Activities” in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data” for additional information), partially offset by higher packaging volumes, commodity deflation, cost savings from continuous improvement and other programs and favorable foreign currency exchange. The commodity deflation was primarily related to external board, which is passed through to our customers, partially offset by other inflation (primarily labor and benefits). Income from Operations was also favorably impacted by a reduction in impairment charges related to the sale of our Russian operations in 2023. Refer to “Note 19 - Divestitures” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for additional information.
Current report
Net Sales decreased due to the Augusta divestiture and reduced open market paperboard volumes and pricing of bleached paperboard.
Current report
Income from Operations decreased due to bleached paperboard price and volume declines (including due to the Augusta Divestiture), weather and power issues, incremental planned maintenance expense and market downtime and commodity and other inflation (primarily secondary fiber, byproduct and labor and benefits offset by energy and wood). This decrease was offset by the gain from the Augusta divestiture (refer to “Note 19 - Divestitures” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for additional information) and productivity improvements, including benefits from capital projects. Income from Operations was also favorably impacted by reductions in accelerated depreciation related to the closure of Tama (refer to “Note 18 - Exit Activities” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for additional information), and a reduction in charges related to the discontinuation of the Texarkana swing capacity project.
Removed paragraphs (46)
Previous report
•Overview of 2023 Results
Previous report
•Critical Accounting Policies
Previous report
•Business Outlook
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OVERVIEW OF BUSINESS
Previous report
The Company’s objective is to strengthen its position as a leading provider of consumer packaging made from renewable resources. To achieve this objective, the Company designs and delivers sustainable packaging solutions such as cartons, carriers, paperboard canisters, cups and lids preferred by consumers. Packaging offerings include a variety of laminated, coated and printed packaging structures that are produced from the Company’s recycled, bleached and unbleached paperboard. Innovative designs and combinations of paperboard, films, foils, metallization, holographic and embossing are customized to the individual needs of the customers.
Previous report
Significant Factors That Impact the Company’s Business and Results of Operations
Previous report
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 $175 million in 2023. The higher costs in 2023 were due to higher labor and benefits ($96 million), other costs, net ($73 million) and commodity inflation costs ($6 million). Other costs, net include manufacturing supplies, property taxes, worker's compensation costs and other insurance costs. Commodity inflation was primarily due to external board ($50 million), mill chemicals ($38 million), factoring ($36 million), converting chemicals ($7 million) and other costs ($15 million) offset by reduced costs for secondary fiber ($55 million), energy ($40 million), freight ($27 million), and wood ($18 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 2024. 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.
Previous report
The Company’s operations and financial results could be adversely impacted by global events outside of the Company’s control. The Company’s operations and financial results could be adversely impacted by global events outside of the Company’s control, such as pandemics or other global health emergencies, or geopolitical conflicts and other social and political unrest or change. As a result of such global events, 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. Global events may result in supply chain and transportation disruptions to and from 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.
Previous report
Commitment to Cost Reduction. 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.
Previous report
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 its 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 anticipated efficiencies and savings could adversely affect the Company’s financial results.
Previous report
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’ recycled, bleached and unbleached paperboard, folding box board, and recycled clay-coated news. Additional substitute products also include plastic, shrink film, corrugated containers and reusables. 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, improved circularity, service and strategic sourcing to its customers; however, pricing and other competitive pressures may occasionally result in the loss of a customer relationship.
Previous report
In addition, the Company’s sales are driven by consumer buying habits in the markets its customers serve. The Company has historically reported net organic sales growth supported by its introduction of new packaging products to meet the consumers' desire for recyclable, sustainable consumer packaging solutions. 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 can also impact its sales.
Previous report
Debt Obligations. The Company had an aggregate principal amount of $5,396 million of outstanding debt obligations as of December 31, 2023. 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. The Covenants in the Company’s Fourth Amended and Restated Credit Agreement (as amended, the “Current Credit Agreement”) and the indentures governing the 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.
Previous report
The debt and the restrictions under the Current Credit Agreement and the 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.
Previous report
OVERVIEW OF RESULTS
Previous report
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:
Previous report
•Net Sales in 2023 decreased by $12 million or 0.1%, to $9,428 million from $9,440 million in 2022 due to lower organic sales and lower volume of open market sales, partially offset by higher pricing, new product introductions, the acquisition of Bell, and favorable foreign exchange.
Previous report
•Income from Operations in 2023 increased by $268 million or 30%, to $1,174 million from $906 million in 2022 due to higher pricing, cost savings from continuous improvement and other programs, and new product introductions, partially offset by lower open market volume, lower organic sales, a higher level of maintenance and market downtime, and unfavorable commodity inflation and other inflation (primarily labor and benefits). Income from Operations was also reduced by unfavorable foreign exchange, accelerated depreciation related to the closure of three smaller recycled paperboard manufacturing facilities, charges and accelerated depreciation related to the closures of multiple packaging facilities, charges and accelerated depreciation related to the Company's decision to decommission its K3 recycled Paperboard machine in Kalamazoo, Michigan and charges related to the discontinuation of the Texarkana swing capacity project. Income from Operations also increased due to a reduction in impairment charges in 2023 compared to 2022 related to the sale of its Russian Operations.
Previous report
•In May 2022, the Company closed the Battle Creek, Michigan recycled paperboard manufacturing facility.
Previous report
•In September 2022, the Company closed its Norwalk, Ohio packaging facility, which it had announced to close in March 2022.
Previous report
•On July 27, 2023, 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 “2023 share repurchase program”). The previous $500 million share repurchase program was authorized January 28, 2019 (the “2019 share repurchase program”).
Previous report
•During 2023, the Company repurchased 2,389,224 shares of its common stock at an average price of $22.80 under the 2019 share repurchase program. As of December 31, 2023, the Company has $565 million available for additional repurchases under the 2023 and 2019 share repurchase programs.
Previous report
•During 2023, the Company declared and paid cash dividends of $123 million.
Previous report
The Company's Net Sales in 2023 decreased by $12 million or 0.1%, to $9,428 million from $9,440 million for the same period in 2022, due to lower organic sales and lower volumes of open market sales. Such decrease was partially offset by higher pricing, new product introductions, favorable foreign exchange, primarily the Euro, Mexican Peso, and British Pound, partially offset by the Canadian Dollar and Australian Dollar and the acquisition of Bell in September 2023. Core packaging volumes were lower in beverage, cereal, dry foods, frozen foods, dairy, convenience, and healthcare, partially offset by higher packaging volumes in foodservice, tissue and beauty.
Previous report
(a)Includes the Company's cost reduction initiatives, planned mill maintenance costs and market downtime, expenses related to acquisitions and integration activities, exit activities, and other special charges.
Previous report
The Company's Income from Operations for 2023 increased $268 million or 30%, to $1,174 million from $906 million for the same period in 2022 due to higher pricing, cost savings from continuous improvement and other programs and new product introductions. The increase was partially offset by lower open market volume, lower organic sales, unfavorable commodity inflation and other inflation (primarily labor and benefits), higher levels of maintenance and market downtime, unfavorable foreign exchange, accelerated depreciation and charges related to the closure of three smaller recycled paperboard manufacturing facilities (refer to “Note 18 - Exit Activities” in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data,” for additional information), accelerated depreciation, charges related to the Company's decision to decommission its K3 recycled paperboard machine in Kalamazoo, Michigan, and the discontinuation of the Texarkana swing capacity project during the third quarter of 2023. Income from Operations also increased due to a reduction in impairment charges in 2023 compared to 2022 related to the sale of the Company's Russian Operations. Refer to “Note 19 - Impairment and Divestiture of Russian Business” in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data,” for additional information.
Previous report
Inflation in 2023 increased due to higher labor and benefits ($96 million), other costs, net ($73 million) and commodity inflation costs ($6 million). Other costs, net include manufacturing supplies, property taxes, worker's compensation costs and other insurance costs. Commodity inflation was primarily due to external board ($50 million), mill chemicals ($38 million), factoring ($36 million), converting chemicals ($7 million) and other costs ($15 million), offset by secondary fiber ($55 million), energy ($40 million), freight ($27 million), and wood ($18 million).
Previous report
The effective tax rate for 2022 was different from the statutory rate primarily due to impairment charges from the planned sale of the Company’s Russian business that resulted in no corresponding tax benefit in addition to the mix of earnings between foreign and domestic jurisdictions, including those with and without valuation allowances. The Company also recognized $10 million of tax expense to release the tax expense remaining in Other Comprehensive Income after the settlement of certain swaps during the period, which increased the effective tax rate.
Previous report
Net Sales decreased due to lower open market volume, partially offset by higher pricing.
Previous report
Income from Operations decreased due to lower open market volume, higher levels of maintenance and market downtime, accelerated depreciation and charges related to the closure of the three recycled paperboard manufacturing facilities (refer to “Note 18 - Exit Activities” in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data,” for additional information), other inflation (primarily labor and benefits), accelerated depreciation and charges related to the Company's decision to decommission its K3 recycled paperboard machine, and charges related to the discontinuation of the Texarkana swing capacity project. The decrease was partially offset by higher pricing, productivity improvements, including benefits from capital projects, and commodity deflation, primarily secondary fiber, energy, wood and freight partially offset by chemicals.
Previous report
Net Sales increased due to higher pricing and new product introductions driven by conversions to our sustainable consumer packaging solutions and the acquisition of Bell in September 2023, partially offset by lower organic sales. Lower packaging volumes in beverage, cereal, dry foods, frozen foods, and dairy were partially offset by higher packaging volumes in foodservice and tissue. In beverage, packaging volumes decreased in big beer, craft beer, specialty beverages and soft drinks.
Previous report
Income from Operations increased due to higher pricing and cost savings from continuous improvement and other programs, partially offset by commodity inflation and other inflation (primarily labor and benefits), higher levels of maintenance and market downtime and charges related to the closures of packaging facilities (refer to “Note 18 - Exit Activities” in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data,” for additional information). The commodity inflation was primarily due to higher prices for external board, chemicals, and factoring, partially offset by lower costs for secondary fiber, energy, freight and wood.
Previous report
Net Sales increased due to higher pricing, mix, new product introductions driven by conversions to our sustainable consumer packaging solutions and favorable foreign currency exchange, partially offset by lower organic sales in beverage, convenience, healthcare and food partially offset by higher volumes in foodservice and beauty.
Previous report
Income from Operations increased due to higher pricing and cost savings from continuous improvement and other programs, partially offset by commodity inflation primarily related to external board, energy and other inflation (primarily labor and benefits), unfavorable foreign currency exchange and lower organic sales. Income from Operations also increased due to a reduction in impairment charges related to the sale of its Russian operations. Refer to “Note 19 - Impairment and Divestiture of Russian Business” in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data,” for additional information.
Previous report
Capital Investment
Previous report
The Company’s capital investments in 2023 were $885 million ($804 million was paid), compared to $430 million ($549 million was paid) in 2022. During 2023, the Company had capital spending of $838 million for adding capacity and improving process capabilities, $24 million for capital spares and $23 million for manufacturing packaging machinery. The increase is primarily driven by the ongoing construction of the Company's new recycled paperboard manufacturing facility in Waco, Texas. For further discussion of the Company's new recycled paperboard manufacturing facility and continued investments made as part of the integration of acquisitions, see “Note 18 - Exit Activities” in the Notes to the Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” In 2022, the capital investments were primarily due to planned asset upgrades at the U.S.-based paperboard manufacturing facilities, including the now completed recycled paperboard machine in Kalamazoo, Michigan.
Previous report
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 $8 million and $5 million as of December 31, 2023 and 2022, respectively.
Previous report
Acquisitions
Previous report
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.
Previous report
On November 1, 2021, the Company completed its acquisition of AR Packaging (the “AR 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. During the fourth quarter of 2022, the Company finalized acquisition accounting, which resulted in a decrease of $38 million to customer relationships. 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.”
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Reworded paragraphs (36)
Previous wording
A detailed discussion of the fiscal 2023 year-over-year changes can be found below and a detailed discussion of fiscal 2022 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, 2022.
Current wording
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 the fiscal 2024 year-over-year changes can be found below and a detailed discussion of fiscal 2023 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, 2023.
Previous wording
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 paperboard manufacturing and packaging facilities; (iii) to develop and market innovative, packaging 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.
Current wording
The Company is implementing strategies (i) to develop and market innovative, packaging products and applications that benefit from consumer-led sustainability trends; (ii) to expand market share in its current markets and to identify and penetrate new markets; (iii) to capitalize on the Company’s customer relationships, business competencies, and manufacturing facilities; and (iv) to 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. We cannot predict with any certainty the impact that rising interest rates, a global or regional recession, or higher inflation may have on our customers or suppliers. Additionally, we are unable to predict the potential effects that any future pandemic or other global health emergency and widespread military and geopolitical conflicts and other social and political unrest or change, including Eastern Europe, Africa and the Middle East, and related sanctions or market disruptions, may have on our business.
Previous wording
•In January 2023, the Company completed the acquisition of Tama, a recycled paperboard manufacturing facility located in Tama, Iowa, from Greif Packaging LLC for approximately $100 million. It is reported within the Paperboard Manufacturing reportable segment. Subsequently, in the second quarter of 2023, the Company closed this facility.
Current wording
•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 included within the Paperboard Manufacturing reportable segment. Subsequently, in the second quarter of 2023, the Company closed this facility.
Previous wording
•During 2023, the Company decided to close multiple packaging facilities by the end of 2023 and early 2024. Production from these facilities will be consolidated into our existing packaging network.
Current wording
•During 2023, the Company decided to close multiple packaging facilities by the end of 2023 and early 2024. Production from these facilities has been consolidated into other existing packaging facilities.
Previous wording
•On September 8, 2023, the Company completed the acquisition of Bell, adding three packaging facilities in Sioux Falls, South Dakota and Groveport, Ohio for $264 million. Bell is reported within the Americas Paperboard Packaging reportable segment.
Current wording
•On September 8, 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.
Previous wording
•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 coated recycled paperboard capacity.
Current wording
•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.
Previous wording
Interest Expense, Net was $239 million and $197 million in 2023 and 2022, respectively. Interest Expense, Net increased due to higher interest rates and higher debt balances. As of December 31, 2023, approximately 20% of the Company’s total debt was subject to floating interest rates.
Current wording
Interest Expense, Net was $230 million and $239 million in 2024 and 2023, respectively. Interest Expense, Net decreased primarily due to an increase in capitalized interest. As of December 31, 2024, approximately 36% of the Company’s total debt was subject to floating interest rates.
Previous wording
During 2023 and 2022, the Company recognized Income Tax Expense of $210 million and $194 million, on Income before Income Taxes of $932 million and $716 million, respectively.
Current wording
During 2024 and 2023, the Company recognized Income Tax Expense of $229 million and $210 million, on Income before Income Taxes of $886 million and $932 million, respectively.
Previous wording
Equity Income of Unconsolidated Entity was $1 million in 2023 and less than $1 million in 2022 and is related to the Company’s equity investment in the Rengo Riverwood Packaging, Ltd. joint venture.
Current wording
Equity Income of Unconsolidated Entity was less than $1 million in both 2024 and 2023 and is related to the Company’s equity investment in the Rengo Riverwood Packaging, Ltd. joint venture.
Previous wording
Americas Paperboard Packaging includes paperboard packaging 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.
Current wording
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 (“QSR”) in the Americas.
Previous wording
Paperboard Manufacturing, previously referred to as the Paperboard Mills reportable segment, includes the seven North American paperboard manufacturing facilities that produce recycled, unbleached and bleached paperboard, which is consumed internally to produce paperboard consumer packaging for the Americas and Europe Packaging segments. Paperboard not consumed internally is sold externally to a wide variety of paperboard packaging converters and brokers. The Paperboard Manufacturing segment's Net Sales represent the sale of paperboard only to external customers. The effect of intercompany transfers to the paperboard packaging segments has been eliminated from the Paperboard Manufacturing segment to reflect the economics of the integration of these segments.
Current wording
Paperboard Manufacturing includes the six North American paperboard manufacturing facilities that produce recycled, unbleached and bleached paperboard, which is primarily consumed internally to produce paperboard consumer packaging for the Americas and Europe Paperboard Packaging segments. Paperboard not consumed internally is sold externally to a small group of paperboard packaging converters. The Paperboard Manufacturing segment's Net Sales represent the sale of paperboard only to external customers. The effect of intercompany transfers to the paperboard packaging segments has been eliminated from the Paperboard Manufacturing segment to reflect the economics of the integration of these segments.
Previous wording
The Company allocates certain paperboard manufacturing 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.
Current wording
The Company allocates certain paperboard manufacturing 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 Pacific Rim and Australia operating segments and unallocated corporate and one-time costs.
Previous wording
(b)Includes accelerated depreciation related to exit activities in 2023, 2022, and 2021. See “Note 18 - Exit Activities” in the Notes to Condensed Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data,” for further information.
Current wording
(b)Includes accelerated depreciation related to exit activities in 2024 and 2023. See “Note 18 - Exit Activities” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for further information.
Previous wording
(c)Includes expenses related to business combinations, exit activities and other special charges. See “Note 1 - General Information” in the Notes to Condensed Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data,” for further information.
Current wording
(c) Includes expenses related to business combinations, exit activities and other special items. See “Note 1 - General Information” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for further information
Previous wording
(e)Includes impairment charges related to Russia. See “Note 19 - Impairment and Divestiture of Russian Business” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data,” for further information.
Current wording
(d)Includes impairment charges related to Russia in 2023 and 2022. See “Note 19 - Divestitures” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for further information.
Previous wording
(d)Includes accelerated depreciation related to exit activities in 2023. See “Note 18 - Exit Activities” in the Notes to Condensed Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data,” for further information.
Current wording
(e)Includes accelerated depreciation related to exit activities in 2024. See “Note 18 - Exit Activities” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for further information.
Previous wording
Net cash provided by operating activities in 2023 totaled $1,144 million, compared to $1,090 million in 2022. The favorable increase was mainly due to an increase in income from operations, offset by higher levels of working capital. Pension contributions in 2023 and 2022 were $15 million and $24 million, respectively. In the first quarter of 2022, the Company made a $6 million contribution to its remaining U.S. defined benefit plan by effectively utilizing the excess balance related to its U.S. defined benefit plan terminated in 2020.
Current wording
Net cash provided by operating activities in 2024 totaled $840 million, compared to $1,144 million in 2023. The decrease was mainly due to a decrease in income from operations, an increase in payments for income taxes, and higher levels of working capital. Pension contributions in 2024 and 2023 were $12 million and $15 million, respectively.
Previous wording
Net cash used in investing activities in 2023 totaled $1,025 million, compared to $435 million in 2022. The Company completed the acquisition of Tama on January 31, 2023 from Greif Packaging LLC for approximately $100 million. The Company also completed the acquisition of Bell for approximately $264 million on September 8, 2023 (including cash acquired of $3 million). For further discussion of the Company's acquired recycled paperboard manufacturing facility and packaging facilities, see “Note 4 - Business Combinations” in the Notes to the Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” Capital spending was $804 million and $549 million in 2023 and 2022, respectively. The increase in capital spending was 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, refer to the Capital Investment section below. Net cash receipts related to the accounts receivable securitization and sale programs were $139 million and $119 million in 2023 and 2022, respectively.
Current wording
Net cash used in investing activities in 2024 totaled $342 million, compared to $1,025 million in 2023. The Company had capital spending of $1,203 million ($1,256 million was capitalized of which $1,169 million was for adding capacity and improving process capabilities, $22 million for capital spares and $34 million for manufacturing packaging machinery) and $804 million ($894 million was capitalized) in 2024 and 2023, respectively. The increase in capital spending was 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 the Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” On May 1, 2024, the Company completed the sale of the Augusta Paperboard Manufacturing Facility to Clearwater Paper Corporation for total cash consideration of $711 million. For further discussion of the Company's Divestiture of the Augusta Paperboard Manufacturing Facility, see “Note 19 - Divestitures” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data". Net cash receipts related to the accounts receivable securitization and sale programs were $152 million and $139 million in 2024 and 2023, respectively. In the prior year the Company completed the acquisition of Tama on January 31, 2023 from Greif Packaging LLC for approximately $100 million. The Company also completed the acquisition of Bell Incorporated, adding three packaging facilities in Sioux Falls, South Dakota and Groveport, Ohio for approximately $262 million on September 8, 2023. For further discussion of the Company's acquired coated recycled paperboard manufacturing facility and packaging facilities, see “Note 4 - Business Combinations” in the Notes to the Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.”
Previous wording
Net cash used in financing activities in 2023 totaled $106 million compared to $666 million in 2022. Current year financing activities included borrowings under revolving credit facilities primarily for capital spending, repurchase of common stock of $54 million and payments on debt of $26 million. The Company also paid dividends of $123 million and withheld $22 million of restricted stock units to satisfy tax withholding obligations related to the payout of restricted stock units. During 2022, the Company also made borrowings under revolving credit facilities primarily for capital spending, repurchase of common stock of $28 million and payments on debt of $14 million. As further discussed in“Note 5 - Debt” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data,” 2022 activities included the redemption of the 4.875% Senior Notes due 2022 of $250 million. The Company also paid dividends and distributions of $92 million and withheld $18 million of restricted stock units to satisfy tax withholding payments related to the payout of restricted stock units.
Current wording
Net cash used in financing activities in 2024 totaled $489 million compared to $106 million in 2023. Current year financing activities included a debt drawing of the new incremental term facilities which consist of a $50 million Incremental Term A-5 Facility (the “Incremental A-5 Loan”), a $200 million Incremental Term A-6 Facility (the “Incremental Term A-6 Loan”), 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 on August 14, 2024 drew $300 million from the senior secured domestic revolving credit facilities 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 included herein under “Item 8., Financial Statements and Supplementary Data.” Other current 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 satisfy tax withholding obligations related to the payout of restricted stock units. In the prior year the Company made borrowings under revolving credit facilities primarily for capital spending, repurchase of common stock of $54 million, and payments on debt of $26 million. The Company also paid dividends and distributions of $123 million and withheld $22 million of restricted stock units to satisfy tax withholding payments related to the payout of restricted stock units.
Previous wording
(a)Includes Net Sales to Nonguarantor Subsidiaries of $520 million.
Current wording
(a)Includes Net Sales to Nonguarantor Subsidiaries of $586 million.
Previous wording
The Company expects its material cash requirements for the next twelve months will be for: capital expenditures, periodic required income tax payments, periodic interest and debt service payments on associated debt (as discussed in Note 5), lease agreements which have fixed lease payment obligations (as discussed in Note 6), and minimum purchase commitments (as discussed in Note 13) 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 our ongoing cash requirements for the foreseeable future, including at least the next twelve months.
Current wording
The Company expects its material cash requirements for the next twelve months will be for: capital expenditures, 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 included herein under “Item 8., Financial Statements and Supplementary Data” for additional information), lease agreements which have fixed lease payment obligations (refer to “Note 6 - Leases” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for additional information), and minimum purchase commitments (refer to “Note 13 - Commitments” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” 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 our ongoing cash requirements for the foreseeable future, including at least the next twelve months.
Previous wording
Principal and interest payments under the term loan facilities and the revolving credit facilities, together with principal and interest payments on the Company's 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.
Current wording
Principal and interest payments under the term loan facilities and the revolving credit facilities, together with principal and interest payments on the Company's 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 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.
Previous wording
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 (Income), Net line item in the Consolidated Statement of Operations. The following table summarizes the activity under these programs for the year ended December 31, 2023 and 2022, respectively:
Current wording
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 in the Consolidated Statements of Operations. The following table summarizes the activity under these programs for the year ended December 31, 2024 and 2023, respectively:
Previous wording
Receivables sold under all programs subject to continuing involvement, which consist principally of collection services, were approximately $770 million and $753 million as of December 31, 2023 and 2022, respectively.
Current wording
Receivables sold under all programs subject to continuing involvement, which consists principally of collection services, were approximately $778 million and $770 million as of December 31, 2024 and 2023, respectively.
Previous wording
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, 2023 and 2022, the Company sold receivables of $1,136 million and $1,124 million, respectively, related to these arrangements.
Current wording
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, 2024 and 2023, the Company sold receivables of $1,104 million and $1,136 million, respectively, related to these arrangements.
Previous wording
The rollforwards of the Company's outstanding obligations confirmed as valid under its SFP for the years ended December 31, 2023, and 2022, are as follows:
Current wording
The activity of the Company's outstanding obligations confirmed as valid under its SFP for the years ended December 31, 2024, and 2023, is as follows:
Previous wording
Non-cash additions to Property, Plant and Equipment, Net included within Accounts Payable on the Company’s Consolidated Balance Sheets were $145 million, $55 million and $169 million as of December 31, 2023, 2022 and 2021, respectively.
Current wording
Non-cash additions to Property, Plant and Equipment, Net included within Accounts Payable on the Company’s Consolidated Balance Sheets were $198 million, $145 million and $55 million as of December 31, 2024, 2023 and 2022, respectively.
Previous wording
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, 2023, the Company was in compliance with such covenant and the ratio was 2.58 to 1.00.
Current wording
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, 2024, the Company was in compliance with such covenant and the ratio was 2.81 to 1.00.
Previous wording
The Company must also comply with a minimum Consolidated Interest Expense Ratio of 3.00 to 1.00. At December 31, 2023, the Company was in compliance with such covenant and the ratio was 7.96 to 1.00.
Current wording
The Company must also comply with a minimum Consolidated Interest Expense Ratio of 3.00 to 1.00. At December 31, 2024, the Company was in compliance with such covenant and the ratio was 7.31 to 1.00.
Previous wording
The Company has packaging facilities and one paperboard manufacturing facility in 20 countries outside of the U.S. and sells its products worldwide. For 2023, before intercompany eliminations, net sales from operations outside of the U.S. represented approximately 30% 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, 2023, 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 Mexico 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 $65 million, which was recorded in Other Comprehensive (Loss) Income for the year ended December 31, 2023. 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.
Current wording
The Company has packaging facilities and one paperboard manufacturing facility in 20 countries outside of the U.S. and sells its products worldwide. For 2024, before intercompany eliminations, net sales from operations outside of the U.S. represented approximately 30% 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, 2024, approximately 26% 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 Mexico 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 $149 million, which was recorded in Other Comprehensive Income (Loss) for the year ended December 31, 2024. 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.
Previous wording
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 2024. 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.”
Current wording
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.”
Previous wording
The Company does not have any off-balance sheet arrangements.
Current wording
The Company had $30 million of standby letters of credit issued under a separate unsecured facility as of December 31, 2024 as disclosed in “Note 5 - Debt” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data. The Company does not have any other off-balance sheet arrangements.
Previous wording
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 acquisitions, future cash flows associated with impairment testing for goodwill and long-lived assets, and deferred income taxes.
Current wording
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 future cash flows associated with impairment testing for goodwill and long-lived assets, and deferred income taxes.
Previous wording
The Company performed its annual goodwill impairment tests as of October 1, 2023. 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 discount rate used for each reporting unit ranged from 8% to 9%, and we utilized a transaction multiple of 8.0 times to calculate terminal period cash flows. The Europe reporting unit had a fair value that exceeded its respective carrying value by 26%, whereas all other reporting units exceeded by more than 90%. 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 Europe reporting unit had goodwill totaling $462 million. 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.
Current wording
The Company performed its annual goodwill impairment tests as of October 1, 2024. 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 discount rate used for each reporting unit ranged from 7% to 8%, and we utilized a transaction multiple of 9.0 times to calculate terminal period cash flows. The Europe reporting unit had a fair value that exceeded its respective carrying value by 24%, whereas all other reporting units exceeded by more than 69%. 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 Europe reporting unit had goodwill totaling $500 million. 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.
Previous wording
As of December 31, 2023, the Company has a valuation allowance of $37 million against its net deferred tax assets in certain foreign jurisdictions and against domestic deferred tax assets related to certain federal tax credit carryforwards. As of December 31, 2022, a total valuation allowance of $57 million was recorded.
Current wording
As of December 31, 2024, the Company has a valuation allowance of $45 million against its net deferred tax assets in certain foreign jurisdictions and against domestic deferred tax assets related to certain federal tax credit carryforwards. As of December 31, 2023, a total valuation allowance of $37 million was recorded.
Previous wording
The Company has not provided for deferred U.S. income taxes on outside basis differences of approximately $92 million 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.
Current wording
The Company has not provided for deferred U.S. income taxes on outside basis differences of approximately $80 million 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.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
•During 2024, the Company decided to close multiple packaging facilities by the end of 2024 and early 2025. These are in addition to the multiple packaging facilities that the Company decided to close by the end of 2023 and early 2024. Production from these facilities will be consolidated into other existing packaging facilities. Current Assets within the Consolidated Balance Sheet include $15 million relating to multiple packaging facilities that met the held for sale criteria as of December 31, 2024.
Current report — wording carried from elsewhere
The effective tax rate for 2024 is different from the statutory rate primarily due to the write off of non-deductible book goodwill associated with the divestiture of Augusta as well as tax benefits of $16 million related to U.S. federal, state and foreign income tax credits, including purchased tax credits.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
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:
Previous report — wording carried elsewhere
The components of the change in Income from Operations are as follows:
Previous report — wording carried elsewhere
Europe Paperboard Packaging includes paperboard packaging, primarily cartons, sold primarily to CPG companies serving the food, beverage and consumer product markets including healthcare and beauty products primarily in Europe.
Previous report — wording carried elsewhere
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES