GRAPHIC PACKAGING HOLDING CO

Covenants contained in the Company's Fifth Amended and Restated Credit Agreement, dated June 3, 2024 (as amended by Amendment No. 1 on February 26, 2026, the "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 Credit Agreement, the Company must comply with a maximum Consolidated Total Leverage Ratio covenant and a minimum Consolidated Interest Expense Ratio covenant.

On February 26, 2026, the Company, GPIP, GPIL, certain subsidiaries of GPIL, and Bank of America, N.A., as administrative agent for the lenders party thereto entered into Amendment No. 1 ("Amendment 1") to the Fifth Amended and Restated Credit Agreement, dated June 3, 2024. Amendment 1 increases the permitted Consolidated Total Leverage Ratio from March 31, 2026 to June 30, 2027. Amendment 1 increases the existing maximum Consolidated Total Leverage Ratio covenant from 4.25 to 1.00 to 5.00 to 1.00 for the period ending March 31, 2026 through December 31, 2026 and to 4.75 to 1.00 for the period ending March 31, 2027, through and including June 30, 2027. Amendment 1 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.

On November 2, 2026, the Company, GPIP, GPIL, and certain subsidiaries of GPIL entered into Amendment No. 2 ("Amendment 2") to the Fifth Amended and Restated Credit Agreement, dated June 3, 2024 (as amended by Amendment 1 to the Fifth Amended and Restated Credit Agreement, dated as of February 26, 2026, by and among the Company, GPIP, GPIL, certain subsidiaries of GPIL and Bank of America, N.A., as administrative agent for the lenders party thereto. Amendment 2 extends the covenant relief period applicable to the Consolidated Total Leverage Ratio through September 30, 2028. Amendment 2 increases the existing maximum Consolidated Total Leverage Ratio covenant to 5.25 to 1.00 for the period ending March 31, 2027, 5.00 to 1.00 for the periods ending June 30, 2027 and September 30, 2027, 4.75 to 1.00 for the periods ending December 31, 2027 and March 31, 2028, 4.50 to 1.00 for the periods ending June 30, 2028 and September 30, 2028 and 4.25 to 1.00 for December 31, 2028 and thereafter. Amendment 2 also modifies the debt incurrence provisions by (i) replacing the existing secured debt incremental basket with an unlimited basket, subject to a 3.50x Senior Secured Leverage test and (ii) eliminating future inside maturity debt capacity. The Company requested the amendment as a risk mitigation measure due to the current dynamic macro environment.

At September 30, 2026, the Company was in compliance with such covenant and the ratio was 4.44 to 1.00.

The Company must also comply with a minimum Consolidated Interest Expense Ratio of 3.00 to 1.00. At September 30, 2026, the Company was in compliance with such covenant and the ratio was 4.27 to 1.00.

Compliance with the Consolidated Total Leverage Ratio and Consolidated Interest Expense Ratio covenants in future periods requires the Company to meet certain planned financial performance improvement and debt reduction targets.

As of September 30, 2026, 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 a liability is probable and the costs are reasonably estimable. The Company believes that the amounts accrued for its loss contingencies, and the reasonably possible loss beyond the amounts accrued, are not material to the Company's consolidated financial position, results of operations or cash flows.

For further discussion of the Company's environmental matters, see Note 8. Environmental and Legal Matters in the Notes to Condensed Consolidated Financial Statements.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 Condensed 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 Company's most critical accounting policies, which require significant judgment or involve complex estimations, are described in the Company's 2025 Annual Report on Form 10-K for the year ended December 31, 2025.

The Company performed its annual goodwill impairment tests as of October 1, 2025. The Company concluded that all reporting units with goodwill have a fair value that exceeds their carrying value, and thus goodwill was not impaired. 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 International reporting unit and the Foodservice reporting unit had goodwill totaling $513 million and $84 million at September 30, 2026, respectively.

The variability of the assumptions that management uses to perform the goodwill impairment test depends on a number of conditions, including uncertainty about future events and cash flows. Accordingly, the Company's accounting estimates may materially change from period to period due to changing market factors. If the Company had used other assumptions and estimates or if different conditions occur in future periods, future operating results and cash flows could be materially impacted, and judgments and conclusions about the recoverability of goodwill could change. The assumptions used in the goodwill impairment testing process could also be adversely impacted by certain of the risks disclosed in Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, and thus could result in future goodwill impairment charges. The Company continuously monitors events which could trigger an interim impairment analysis, such as changing business conditions, our financial performance and our market capitalization. The Company determined there were no triggering events requiring an interim impairment analysis during the three months ended September 30, 2026.

New Accounting Standards

For a discussion of recent accounting pronouncements impacting the Company, see Note 1. General Information in the Notes to Condensed Consolidated Financial Statements.