GRAPHIC PACKAGING HOLDING COGPK
GRAPHIC PACKAGING HOLDING CO Stock Compensation Disclosure
STOCK INCENTIVE PLANS
The Company has one active equity compensation plan from which new grants may be made, the Graphic Packaging Holding Company 2024 Omnibus Incentive Compensation Plan (the “2024 Plan”). Prior to the approval of the 2024 Plan and the expiration of the 2014 Plan, the Company made all new grants under the 2014 Plan. The 2024 Plan and 2014 Plan allow for granting shares of stock, options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), and other types of stock-based and cash awards. Awards under the 2024 Plan and 2014 Plan vest and expire in accordance with terms established at the time of grant. Shares issued pursuant to awards under the 2024 Plan and 2014 Plan are from GPHC’s authorized but unissued shares. Compensation costs are recognized on a straight-line basis over the requisite service period of the award and are adjusted for actual performance for performance-based awards. As of December 31, 2024, there were 11.1 million shares remaining available to be granted under the 2024 Plan.
Stock Awards, Restricted Stock and Restricted Stock Units
Under the 2024 and 2014 Plans and related RSU grant agreements, RSUs granted to employees generally vest and become payable in to three years from the date of grant. RSUs granted to employees generally contain some combination of service and performance objectives based on various financial targets that must be met for the RSUs to vest, and a relative total shareholder return modifier. The 2022 and 2023 award agreements contain vesting provisions that allow retiring employees to vest on a daily pro-rata basis from the date of grant through their retirement date. In the 2024 grant agreements, the vesting provisions were changed to allow retiring employees to vest in full upon an eligible retirement. This change required the Company to accelerate the recognition of the compensation expense for the 2024 grants for active retirement-eligible employees. Retirement eligibility is dependent upon meeting certain age and/or years of service and notice requirements.
RSUs granted as deferred compensation for non-employee directors are fully vested but not payable until the distribution date elected by the director. Stock awards issued to non-employee directors as part of their compensation for service on the Board are unrestricted on the grant date.
Data concerning RSUs and Stock Awards granted in the years ended December 31 is as follows:
| 2024 | 2023 | 2022 | |||||||||
RSUs - Employees and Non-Employee Directors | 1,581,341 | 1,780,345 | 1,943,769 | ||||||||
Weighted-average grant date fair value | $ | 24.67 | $ | 23.74 | $ | 20.19 | |||||
Stock Awards - Board of Directors | 23,540 | 25,588 | 34,160 | ||||||||
Weighted-average grant date fair value | $ | 27.19 | $ | 25.01 | $ | 20.49 | |||||
A summary of the changes in the number of unvested RSUs from December 31, 2021 to December 31, 2024 is presented below:
| RSUs | Weighted Average Grant Date Fair Value | |||||||
| Outstanding - December 31, 2021 | 4,929,861 | $ | 14.47 | |||||
Granted(a) | 1,943,769 | 20.19 | ||||||
| Released | (2,180,435) | 12.34 | ||||||
| Forfeited | (193,145) | 17.59 | ||||||
Performance adjustment(b) | 324,814 | 12.52 | ||||||
| Outstanding - December 31, 2022 | 4,824,864 | $ | 17.48 | |||||
Granted(a) | 1,780,345 | 23.74 | ||||||
| Released | (2,313,891) | 15.62 | ||||||
| Forfeited | (102,583) | 20.21 | ||||||
Performance adjustment(b) | 753,702 | 15.59 | ||||||
| Outstanding - December 31, 2023 | 4,942,437 | $ | 20.20 | |||||
Granted(a) | 1,581,341 | 24.67 | ||||||
| Released | (2,312,785) | 16.08 | ||||||
| Forfeited | (279,181) | 21.36 | ||||||
Performance adjustment(b) | 865,788 | 15.59 | ||||||
| Outstanding - December 31, 2024 | 4,797,600 | $ | 22.31 | |||||
(a) Grant activity for all performance-based RSUs is disclosed at target.
(b) Reflects the number of RSUs paid out above target levels based on actual performance measured at the end of the performance period.
The initial value of the service-based RSUs is generally based on the closing market value of GPHC’s common stock on the date of grant, discounted to reflect that the RSUs do not accrue dividends during the vesting period. The 2024 performance-based RSU grants were valued using a Monte Carlo simulation as the total shareholder return contains a market condition. RSUs are recorded in Shareholders' Equity. The unrecognized expense at December 31, 2024 is approximately $37 million and is expected to be recognized over a weighted average period of 2 years.
The value of stock awards granted to the Company's directors as compensation are based on the market value of GPHC’s common stock on the date of grant. These awards are unrestricted on the date of grant.
During 2024, 2023, and 2022, $52 million, $44 million and $34 million, respectively, were charged to compensation expense for stock incentive plans and such amounts are included in Selling, General and Administrative expenses in the Consolidated Statements of Operations. In addition, during 2024 $10 million was charged to compensation expense for the incremental expense related to the change of vesting provisions in the 2024 grants and included in Business Combinations, Exit Activities and Other Special Items, Net in the Consolidated Statements of Operations.
During 2024, 2023, and 2022, RSUs with an aggregate fair value of $61 million, $54 million and $44 million, respectively, vested and were paid out. The RSUs vested and paid out in 2024 were granted primarily during 2021.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.