GRAPHIC PACKAGING HOLDING CO (GPK)

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. This discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 along with the Condensed Consolidated Financial Statements and related notes included in and referred to within this report.

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 health care. Graphic Packaging produces packaging solutions at approximately 100 locations in approximately 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 specifications 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.

Acquisitions and Dispositions

•In June 2026, the Company completed the sale of its Croatia business to a third party for total consideration of $6 million. A $13 million charge was recognized in connection with the sale within the International Paperboard Packaging reportable segment during the six months ended June 30, 2026.

•In May 2025, the Company closed its Middletown, Ohio, recycled paperboard manufacturing facility (the "Middletown facility"). The Company completed the sale of the Middletown facility in the second quarter of 2026.

•In December 2025, the Company closed its East Angus, Québec, recycled paperboard manufacturing facility.

Current Assets and Current Liabilities on the Condensed Consolidated Balance Sheets include $8 million and $2 million, respectively, primarily related to multiple paperboard manufacturing and packaging facilities that met the held for sale criteria as of June 30, 2026. Current Assets on the Condensed Consolidated Balance Sheets include $10 million primarily related to multiple paperboard manufacturing and packaging facilities that met the held for sale criteria as of December 31, 2025. During the three and six months ended June 30, 2026, the Company recognized a gain of $1 million and $5 million, respectively, on the sales of exited properties.

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Results of Operations

Second Quarter 2026 Compared to Second Quarter 2025

Net Sales

The components of the change in Net Sales are as follows:

The Company's Net Sales for the three months ended June 30, 2026 decreased by $16 million, or 1%, to $2,188 million from $2,204 million for the three months ended June 30, 2025 due to lower pricing of $27 million, the Croatia divestiture and other items, partially offset by a favorable foreign currency exchange of $20 million, while packaging volumes were relatively flat. Innovation sales growth was $40 million, driven by sales of the Company's sustainable consumer packaging solutions. Higher packaging sales in the food and health and beauty markets were partially offset by lower packaging sales in the foodservice and household markets, while packaging sales in the beverage market were relatively flat.

Income from Operations

Income from Operations for the three months ended June 30, 2026 decreased $98 million, or 51%, to $95 million from $193 million for the three months ended June 30, 2025, due to lower pricing, production curtailment impacts, other inflation (primarily labor and benefits) of $24 million, commodity inflation (including logistics, chemicals, secondary fiber and purchased materials, partially offset by wood) of $36 million and unfavorable foreign currency exchange, partially offset by positive Net Performance of $9 million.

Income from Operations was also unfavorably impacted by an additional $5 million of charges related to cost and production optimization initiatives, primarily for severance following the review of support functions and other expenses. Income from Operations was favorably impacted by a reduction in accelerated depreciation related to the closures of several paperboard facilities of $4 million and by the start-up charges related to Waco of $10 million in 2025 that did not recur in 2026.

Interest Expense, Net

Interest Expense, Net was $68 million and $53 million for the three months ended June 30, 2026 and 2025, respectively. Interest Expense, Net increased primarily due to lower capitalized interest as a result of completion of the Waco project. The Company capitalized interest of $1 million and $15 million for the three months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, approximately 34% of the Company's total debt was subject to floating interest rates.

Income Tax Expense

During the three months ended June 30, 2026, the Company recognized Income Tax Expense of $2 million on Income before Income Taxes of $26 million. The effective tax rate for the three months ended June 30, 2026 is different from the statutory rate primarily due to discrete tax adjustments including a $6 million tax benefit from the release of reserves for uncertain tax positions following the expiration of applicable statutes of limitations, as well as the mix of earnings between foreign and domestic jurisdictions, including those with and without valuation allowances.

During the three months ended June 30, 2025, the Company recognized Income Tax Expense of $35 million on Income before Income Taxes of $139 million. The effective tax rate for the three months ended June 30, 2025 is different from the statutory rate primarily due to the mix of earnings between foreign and domestic jurisdictions, including those with and without valuation allowances.

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First Six Months of 2026 Compared to First Six Months of 2025

Net Sales

The components of the change in Net Sales are as follows:

The Company's Net Sales for the six months ended June 30, 2026 increased by $20 million to $4,344 million from $4,324 million for the six months ended June 30, 2025, driven by higher volumes and a favorable foreign currency exchange of $77 million, partially offset by lower pricing of $59 million, the Croatia divestiture and other items. Innovation sales growth was $82 million, driven by conversions to the Company's sustainable consumer packaging solutions. Lower packaging sales in the foodservice and household markets were partially offset by higher packaging sales in the food and health and beauty markets, while packaging sales in the beverage market were relatively flat.

Income from Operations

Income from Operations for the six months ended June 30, 2026 decreased $300 million, or 72%, to $114 million from $414 million for the six month

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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

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2025 Compared to 2024

Net Sales

The components of the change in Net Sales are as follows:

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 favorably 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 Unconsolid

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