WestRock Company (NYSE:WRK), a leading provider of sustainable
paper and packaging solutions, today announced results for its
fiscal third quarter ended June 30, 2023.
Third Quarter Highlights and other notable items:
- Net sales of $5.121 billion
- Net income of $202 million, Adjusted Net Income of $229
million
- Earned $0.79 per diluted share (“EPS”) and $0.89 of Adjusted
EPS
- Consolidated Adjusted EBITDA of $802 million; Corrugated
Packaging segment Adjusted EBITDA increased 11.6%
year-over-year
- Results negatively impacted by $89 million due to economic
downtime and a $39 million increase in non-cash pension costs
year-over-year; WestRock’s U.S. qualified and non-qualified pension
plans remain overfunded
- Exceeding cost savings expectations in fiscal 2023 compared to
fiscal 2022, on track to exit fiscal 2023 with greater than $450
million in run-rate savings
“We delivered impressive results under challenging market
conditions,” said David B. Sewell, chief executive officer. “Our
accelerated transformation strategy is exceeding expectations. We
expect to exit the year with a cost savings run-rate of over $450
million. We remain focused on partnering with our customers,
streamlining our portfolio, investing in our assets and further
reducing costs. I’m excited about our execution as we continue to
transform WestRock into a more efficient and more profitable
company.”
Consolidated Financial Results
WestRock’s performance for the three months ended June 30, 2023
and 2022 (in millions):
Three Months Ended Jun. 30, 2023 Jun. 30, 2022 $ Var. % Var.
Net sales
$
5,121.1
$
5,519.7
$
(398.6
)
-7.2
%
Net income
$
202.0
$
377.9
$
(175.9
)
-46.5
%
Consolidated Adjusted EBITDA
$
801.9
$
1,005.5
$
(203.6
)
-20.2
%
The year-over-year decline in net sales was driven primarily by
a $545 million, or 33.8%, decrease in Global Paper segment sales,
which was partially offset by a $183 million, or 7.7%, increase in
Corrugated Packaging segment sales. The increase in segment sales
in the Corrugated Packaging segment in the current year quarter
includes the operations of our former joint venture in Mexico since
its December 2022 consolidation (“Mexico Acquisition”).
Net income declined in the third quarter of fiscal 2023 compared
to the prior year quarter primarily due to lower volumes excluding
the Mexico Acquisition, the impact of increased economic downtime
and planned maintenance outages, higher restructuring costs,
increased non-cash pension costs, higher net interest expense and
business systems transformation costs. These costs were partially
offset by the impact of higher selling price/mix, increased cost
savings, contribution from the Mexico Acquisition, net cost
deflation and the gain on sale of an unconsolidated entity.
Consolidated Adjusted EBITDA decreased $204 million, or 20.2%,
year-over-year, primarily due to lower Global Paper segment
Adjusted EBITDA that was partially offset by higher Adjusted EBITDA
in our Corrugated Packaging segment.
Additional information about the changes in segment sales and
Adjusted EBITDA by segment is included below.
Restructuring and Other Costs
Restructuring and other costs during the third quarter of fiscal
2023 were $48 million. The charges were primarily costs associated
with the consolidation of converting facilities, ongoing costs
related to previously closed operations, and acquisition,
integration and divestiture costs.
Cash Flow Activities
Net cash provided by operating activities was $694 million in
the third quarter of fiscal 2023 compared to $837 million in the
prior year quarter primarily due to lower earnings.
Total debt was $9.0 billion at March 31, 2023, and Adjusted Net
Debt was $8.6 billion. Total debt decreased $479 million compared
to the second quarter of fiscal 2023. The Company had approximately
$3.5 billion of available liquidity from long-term committed credit
facilities and cash and cash equivalents at June 30, 2023.
During the third quarter of fiscal 2023, WestRock invested $255
million in capital expenditures and returned $71 million in capital
to stockholders in dividend payments.
Segment Results
We have included the financial results of the Mexico Acquisition
in our Corrugated Packaging segment.
WestRock’s segment performance for the three months ended June
30, 2023 and 2022 was as follows (in millions):
Corrugated Packaging Segment
Three Months Ended Jun. 30, 2023 Jun. 30, 2022 Var. % Var.
Segment sales
$
2,565.7
$
2,382.5
$
183.2
7.7%
Adjusted EBITDA
$
429.7
$
385.2
$
44.5
11.6%
Adjusted EBITDA Margin
16.7%
16.2%
50 bps
Corrugated Packaging segment sales increased primarily due to
sales from the Mexico Acquisition and higher selling price/mix that
were partially offset by lower volumes excluding the Mexico
Acquisition. In addition, the third quarter of fiscal 2023 included
$37 million of segment sales for certain converting operations that
were included in the Consumer Packaging segment in the prior year
period.
Corrugated Packaging Adjusted EBITDA increased primarily due to
net cost deflation, the incremental contribution from the Mexico
Acquisition, cost savings and the margin impact from higher selling
price/mix, which were partially offset by lower volumes excluding
the Mexico Acquisition, economic downtime, planned maintenance
outages and non-cash pension costs, each as compared to the prior
year period. Corrugated Packaging Adjusted EBITDA margin was 16.7%
and Adjusted EBITDA margin excluding trade sales was 17.4%.
Consumer Packaging Segment
Three Months Ended Jun. 30, 2023 Jun. 30, 2022 Var. % Var.
Segment sales
$
1,250.6
$
1,270.2
$
(19.6)
-1.5%
Adjusted EBITDA
$
230.0
$
234.9
$
(4.9)
-2.1%
Adjusted EBITDA Margin
18.4%
18.5%
-10 bps
Consumer Packaging segment sales decreased primarily due to
lower volumes and the unfavorable impact of foreign currency. In
addition, the third quarter of fiscal 2022 included $37 million of
segment sales for certain converting operations now included in the
Corrugated Packaging segment. These items were partially offset by
higher selling price/mix.
Consumer Packaging Adjusted EBITDA decreased primarily due to
lower volumes, net cost inflation, economic downtime and non-cash
pension costs. In addition, the third quarter of fiscal 2022
included $8 million of Adjusted EBITDA for certain converting
operations now included in the Corrugated Packaging segment. These
items were largely offset by the margin impact from higher selling
price/mix and cost savings, each as compared to the prior year
period. Consumer Packaging Adjusted EBITDA margin was 18.4%.
Global Paper Segment
Three Months Ended Jun. 30, 2023 Jun. 30, 2022 Var. % Var.
Segment sales
$
1,065.7
$
1,610.3
$
(544.6)
-33.8%
Adjusted EBITDA
$
177.0
$
399.0
$
(222.0)
-55.6%
Adjusted EBITDA Margin
16.6%
24.8%
-820 bps
Global Paper segment sales decreased primarily due to lower
volumes and lower selling price/mix. Additionally, segment sales
are lower than the prior year period because sales to the
operations acquired in the Mexico Acquisition are now
eliminated.
Global Paper Adjusted EBITDA decreased primarily due to lower
volumes, economic downtime, the impact of lower selling price/mix,
planned maintenance outages, the unfavorable impact of foreign
currency and increased non-cash pension costs, which were partially
offset by net cost deflation and cost savings, each as compared to
the prior year period. Global Paper Adjusted EBITDA margin was
16.6%.
Distribution Segment
Three Months Ended Jun. 30, 2023 Jun. 30, 2022 Var. % Var.
Segment sales
$
317.8
$
357.7
$
(39.9)
-11.2%
Adjusted EBITDA
$
6.0
$
19.2
$
(13.2)
-68.8%
Adjusted EBITDA Margin
1.9%
5.4%
-350 bps
Distribution segment sales decreased primarily due to lower
volumes. The lower volumes were primarily due to lower moving and
storage business volumes in the current quarter and a large
healthcare order in the third quarter of fiscal 2022.
Distribution Adjusted EBITDA decreased primarily due to lower
volumes, increased cost inflation and the margin impact of lower
selling price/mix which were partially offset by cost savings, each
as compared to the prior year period.
Conference Call
WestRock will host a conference call to discuss its results of
operations for the fiscal third quarter ended June 30, 2023, and
other topics that may be raised during the discussion at 8:30 a.m.,
Eastern Time, on Thursday, August 3, 2023. The conference call,
which will be webcast live, an accompanying slide presentation, and
this release can be accessed at ir.westrock.com.
Investors who wish to participate in the webcast via
teleconference should dial 833-630-1583 (inside the U.S.) or +1
412-317-1822 (outside the U.S.) at least 15 minutes prior to the
start of the call and ask to be joined into the WestRock Company
call. Replays of the call can be accessed at ir.westrock.com.
About WestRock
WestRock (NYSE:WRK) partners with our customers to provide
differentiated, sustainable paper and packaging solutions that help
them win in the marketplace. WestRock’s team members support
customers around the world from locations spanning North America,
South America, Europe, Asia and Australia. Learn more at
www.westrock.com.
Cautionary Statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on our current expectations,
beliefs, plans or forecasts and use words or phrases such as "may,"
"will," "could," "should," "would," "anticipate," "estimate,"
"expect," "project," "intend," "plan," "believe," "target,"
"prospects," "potential" and "forecast," and other words, terms and
phrases of similar meaning or refer to future time periods.
Forward-looking statements involve estimates, expectations,
projections, goals, targets, forecasts, assumptions, risks and
uncertainties. A forward-looking statement is not a guarantee of
future performance, and actual results could differ materially from
those contained in the forward-looking statement.
Forward-looking statements are subject to a number of
assumptions, risks and uncertainties, many of which are beyond our
control, such as developments related to pricing cycles and
volumes; economic, competitive and market conditions generally,
including macroeconomic uncertainty, and adverse developments
affecting the financial services industry, customer inventory
rebalancing, the impact of inflation and increases in energy, raw
materials, shipping, labor and capital equipment costs; reduced
supply of raw materials, energy and transportation, including from
supply chain disruptions and labor shortages; intense competition;
results and impacts of acquisitions, including operational and
financial effects from the Mexico Acquisition, and divestitures as
well as risks related to our joint ventures; business disruptions,
including from public health crises such as a resurgence of COVID,
the occurrence of severe weather or a natural disaster or other
unanticipated problems, such as labor difficulties, equipment
failure or unscheduled maintenance and repair; failure to respond
to changing customer preferences; the amount and timing of capital
expenditures, including installation costs, project development and
implementation costs, and costs related to resolving disputes with
third parties with which we work to manage and implement capital
projects; risks related to international sales and operations; the
production of faulty or contaminated products; the loss of certain
customers; adverse legal, reputational, operational and financial
effects resulting from cyber incidents and the effectiveness of
business continuity plans during a ransomware or other cyber
incident; work stoppages and other labor relations difficulties;
inability to attract, motivate, train and retain qualified
personnel; risks associated with sustainability and climate change,
including our ability to achieve our environmental, social and
governance targets and goals on announced timelines or at all; our
inability to successfully identify and make performance
improvements or deliver cost savings and risks associated with
completing strategic projects on anticipated timelines and
realizing anticipated financial or operational improvements on
announced timelines or at all, including with respect to our
business systems transformation; risks related to our indebtedness;
the scope, costs, timing and impact of any restructuring of our
operations and corporate and tax structure; our desire or ability
to repurchase company stock; the scope, timing and outcome of any
litigation, claims or other proceedings or dispute resolutions and
the impact of any such litigation (including with respect to the
Brazil tax liability matter); and additional impairment charges.
Such risks and other factors that may impact forward-looking
statements are discussed in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2022, including in Item 1A “Risk
Factors”, as well as in our subsequent filings with the Securities
and Exchange Commission. The information contained herein speaks as
of the date hereof, and the Company does not have or undertake any
obligation to update or revise its forward-looking statements,
whether as a result of new information, future events or otherwise,
except to the extent required by law.
WestRock Company Consolidated Statements of
Operations In millions, except per share amounts (unaudited)
Three Months Ended Nine Months Ended June 30,
June 30,
2023
2022
2023
2022
Net sales
$
5,121.1
$
5,519.7
$
15,321.8
$
15,854.0
Cost of goods sold
4,099.6
4,360.3
12,614.8
12,894.3
Gross profit
1,021.5
1,159.4
2,707.0
2,959.7
Selling, general and administrative expense excluding intangible
amortization
541.5
504.3
1,519.5
1,450.3
Selling, general and administrative intangible amortization expense
84.8
87.5
257.6
263.6
Loss (gain) on disposal of assets
1.0
(0.2
)
(9.3
)
(11.6
)
Multiemployer pension withdrawal income
(12.2
)
-
(12.2
)
(3.3
)
Restructuring and other costs
47.7
0.6
525.4
366.3
Impairment of goodwill and other assets
-
26.0
1,893.0
26.0
Operating profit (loss)
358.7
541.2
(1,467.0
)
868.4
Interest expense, net
(108.1
)
(78.5
)
(313.8
)
(237.7
)
Loss on extinguishment of debt
-
-
-
(8.2
)
Pension and other postretirement non-service (cost) income
(5.3
)
38.7
(16.3
)
118.3
Other income (expense), net
1.4
(7.2
)
8.8
(0.7
)
Equity in income (loss) of unconsolidated entities
23.7
18.3
(7.8
)
57.3
Income (loss) before income taxes
270.4
512.5
(1,796.1
)
797.4
Income tax (expense) benefit
(67.3
)
(132.7
)
41.2
(193.1
)
Consolidated net income (loss)
203.1
379.8
(1,754.9
)
604.3
Less: Net income attributable to noncontrolling interests
(1.1
)
(1.9
)
(3.9
)
(4.2
)
Net income (loss) attributable to common stockholders
$
202.0
$
377.9
$
(1,758.8
)
$
600.1
Computation of diluted earnings per share under the
two-class method (in millions, except per share data): Net
income (loss) attributable to common stockholders
$
202.0
$
377.9
$
(1,758.8
)
$
600.1
Less: Distributed and undistributed income available to
participating securities
-
-
-
(0.1
)
Distributed and undistributed income (loss) available to common
stockholders
$
202.0
$
377.9
$
(1,758.8
)
$
600.0
Diluted weighted average shares outstanding
257.0
257.4
255.5
263.2
Diluted earnings (loss) per share
$
0.79
$
1.47
$
(6.88
)
$
2.28
WestRock Company Segment Information In
millions (unaudited)
Three Months Ended Nine Months
Ended June 30, June 30,
2023
2022
2023
2022
Net sales: Corrugated Packaging
$
2,565.7
$
2,382.5
$
7,530.5
$
6,921.5
Consumer Packaging
1,250.6
1,270.2
3,730.7
3,659.5
Global Paper
1,065.7
1,610.3
3,357.5
4,501.0
Distribution
317.8
357.7
946.6
1,044.8
Intersegment Eliminations
(78.7
)
(101.0
)
(243.5
)
(272.8
)
Total
$
5,121.1
$
5,519.7
$
15,321.8
$
15,854.0
Adjusted EBITDA: Corrugated Packaging
$
429.7
$
385.2
$
1,166.6
$
1,002.8
Consumer Packaging
230.0
234.9
631.9
610.0
Global Paper
177.0
399.0
521.4
940.0
Distribution
6.0
19.2
26.1
53.7
Total
842.7
1,038.3
2,346.0
2,606.5
Depreciation, depletion and amortization
(382.5
)
(377.3
)
(1,151.5
)
(1,117.4
)
Gain on sale of certain closed facilities
-
-
9.8
14.4
Multiemployer pension withdrawal income
12.2
-
12.2
3.3
Restructuring and other costs
(47.7
)
(0.6
)
(525.4
)
(366.3
)
Impairment of goodwill and other assets
-
(26.0
)
(1,893.0
)
(26.0
)
Non-allocated expenses
(40.8
)
(32.8
)
(103.4
)
(66.8
)
Interest expense, net
(108.1
)
(78.5
)
(313.8
)
(237.7
)
Loss on extinguishment of debt
-
-
-
(8.2
)
Other income (expense), net
1.4
(7.2
)
8.8
(0.7
)
Other adjustments
(6.8
)
(3.4
)
(185.8
)
(3.7
)
Income (loss) before income taxes
$
270.4
$
512.5
$
(1,796.1
)
$
797.4
Depreciation, depletion and amortization: Corrugated
Packaging
$
204.2
$
169.7
$
607.6
$
503.6
Consumer Packaging
85.8
88.2
255.4
264.6
Global Paper
84.1
113.0
264.4
329.0
Distribution
6.9
5.8
20.7
17.4
Corporate
1.5
0.6
3.4
2.8
Total
$
382.5
$
377.3
$
1,151.5
$
1,117.4
Other adjustments: Corrugated Packaging
$
(21.3
)
$
0.8
$
33.2
$
(5.6
)
Consumer Packaging
0.3
-
59.9
7.7
Global Paper
5.2
2.6
31.8
1.6
Distribution
0.1
-
0.1
-
Corporate
22.5
-
60.8
-
Total
$
6.8
$
3.4
$
185.8
$
3.7
WestRock Company Consolidated Statements of Cash
Flows In millions (unaudited)
Three Months Ended Nine
Months Ended June 30, June 30,
2023
2022
2023
2022
Cash flows from operating activities: Consolidated net
income (loss)
$
203.1
$
379.8
$
(1,754.9
)
$
604.3
Adjustments to reconcile consolidated net income (loss) to net cash
provided by operating activities: Depreciation, depletion and
amortization
382.5
377.3
1,151.5
1,117.4
Deferred income tax benefit
(109.7
)
(14.4
)
(349.3
)
(114.4
)
Share-based compensation expense
32.5
34.6
55.6
74.3
401(k) match and company contribution in common stock
-
-
-
2.5
Pension and other postretirement funding more (less) than cost
(income)
5.2
(34.5
)
13.4
(101.8
)
Cash surrender value increase in excess of premiums paid
(12.4
)
12.5
(37.8
)
(2.5
)
Equity in (income) loss of unconsolidated entities
(23.7
)
(18.3
)
7.8
(57.3
)
Gain on sale of businesses
(0.1
)
-
(11.2
)
-
Impairment of goodwill and other assets
-
26.0
1,893.0
26.0
Other impairment adjustments
19.6
(7.8
)
407.3
314.3
Loss (gain) on disposal of plant and equipment and other, net
1.0
(0.8
)
(8.6
)
(12.3
)
Other, net
(14.8
)
(12.8
)
(29.1
)
(7.5
)
Changes in operating assets and liabilities, net of acquisitions /
divestitures: Accounts receivable
105.8
(30.9
)
276.1
(260.0
)
Inventories
15.4
(130.5
)
(29.4
)
(263.9
)
Other assets
(69.9
)
(20.5
)
(119.6
)
(172.9
)
Accounts payable
(25.4
)
55.7
(239.7
)
120.0
Income taxes
65.6
26.4
112.3
129.4
Accrued liabilities and other
118.9
195.6
(93.8
)
84.5
Net cash provided by operating activities
693.6
837.4
1,243.6
1,480.1
Investing activities: Capital expenditures
(254.6
)
(215.4
)
(818.3
)
(569.5
)
Cash paid for purchase of businesses, net of cash acquired
-
-
(853.5
)
(7.0
)
Proceeds from corporate owned life insurance
29.3
2.1
36.0
29.8
Proceeds from sale of businesses
0.4
-
26.3
-
Proceeds from sale of unconsolidated entity
43.8
-
43.8
-
Proceeds from currency forward contracts
-
-
23.2
-
Proceeds from sale of property, plant and equipment
3.0
2.6
21.7
25.6
Proceeds from property, plant and equipment insurance settlement
-
-
-
1.7
Other, net
(0.4
)
3.1
(1.2
)
5.2
Net cash used for investing activities
(178.5
)
(207.6
)
(1,522.0
)
(514.2
)
Financing activities: Additions to revolving credit
facilities
-
-
52.9
-
Repayments of revolving credit facilities
(184.6
)
(60.0
)
(311.5
)
(100.0
)
Additions to debt
56.1
121.2
1,760.2
881.3
Repayments of debt
(283.9
)
(365.3
)
(1,125.6
)
(1,166.5
)
Changes in commercial paper, net
(141.8
)
(41.8
)
149.6
182.8
Other debt additions, net
51.6
2.3
35.5
7.1
Issuances of common stock, net of related tax withholdings
2.3
10.9
(14.0
)
1.7
Purchases of common stock
-
(289.8
)
-
(600.0
)
Cash dividends paid to stockholders
(70.5
)
(63.8
)
(210.8
)
(195.9
)
Other, net
(0.6
)
8.3
(0.1
)
23.7
Net cash (used for) provided by financing activities
(571.4
)
(678.0
)
336.2
(965.8
)
Effect of exchange rate changes on cash and cash equivalents, and
restricted cash
10.3
(6.6
)
8.3
14.4
Changes in cash and cash equivalents, and restricted cash in assets
held-for-sale
(2.6
)
-
(11.5
)
-
(Decrease) increase in cash and cash equivalents and restricted
cash
(48.6
)
(54.8
)
54.6
14.5
Cash and cash equivalents, and restricted cash at beginning of
period
363.4
360.2
260.2
290.9
Cash and cash equivalents, and restricted cash at end of period
$
314.8
$
305.4
$
314.8
$
305.4
Supplemental disclosure of cash flow information:
Cash paid during the period for: Income taxes, net of refunds
$
111.0
$
120.0
$
197.2
$
175.8
Interest, net of amounts capitalized
$
92.6
$
62.1
$
306.1
$
238.1
WestRock Company Condensed Consolidated Balance
Sheets In millions (unaudited)
June 30,
September 30,
2023
2022
Assets Current assets: Cash and
cash equivalents
$
314.8
$
260.2
Accounts receivable (net of allowances of $66.6 and $66.3)
2,742.6
2,683.9
Inventories
2,549.0
2,317.1
Other current assets
1,666.2
689.8
Assets held for sale
175.4
34.4
Total current assets
7,448.0
5,985.4
Property, plant and equipment, net
11,262.5
10,081.4
Goodwill
4,266.0
5,895.2
Intangibles, net
2,677.0
2,920.6
Prepaid pension asset
474.1
440.3
Other noncurrent assets
2,021.3
3,082.6
Total Assets
$
28,148.9
$
28,405.5
Liabilities and Equity
Current liabilities: Current portion of debt
$
419.4
$
212.2
Accounts payable
2,163.0
2,252.1
Accrued compensation and benefits
483.7
627.9
Other current liabilities
1,870.4
810.6
Liabilities held for sale
67.2
-
Total current liabilities
5,003.7
3,902.8
Long-term debt due after one year
8,607.6
7,575.0
Pension liabilities, net of current portion
215.4
189.4
Postretirement medical liabilities, net of current portion
109.4
105.4
Deferred income taxes
2,505.5
2,761.9
Other noncurrent liabilities
1,673.8
2,445.8
Redeemable noncontrolling interests
8.7
5.5
Total stockholders' equity
10,007.8
11,402.0
Noncontrolling interests
17.0
17.7
Total Equity
10,024.8
11,419.7
Total Liabilities and Equity
$
28,148.9
$
28,405.5
Definitions, Non-GAAP Financial
Measures and Reconciliations
We calculate cost savings as the year-over-year change in
certain costs incurred for manufacturing, procurement, logistics,
and selling, general and administrative, in each case excluding the
impact of economic downtime and inflation. Cost savings achieved to
date may not recur in future periods, and estimates of future
savings are subject to change.
WestRock reports its financial results in accordance with
accounting principles generally accepted in the United States
("GAAP"). However, management believes certain non-GAAP financial
measures provide WestRock’s management, board of directors,
investors, potential investors, securities analysts and others with
additional meaningful financial information that should be
considered when assessing our ongoing performance. Management also
uses these non-GAAP financial measures in making financial,
operating and planning decisions, and in evaluating WestRock’s
performance. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, WestRock’s GAAP
results. The non-GAAP financial measures we present may differ from
similarly captioned measures presented by other companies.
Business Systems
Transformation Costs
In the fourth quarter of fiscal 2022,
WestRock launched a multi-year phased business systems
transformation project. Due to the nature, scope and magnitude of
this investment, management believes these incremental
transformation costs are above the normal, recurring level of
spending for information technology to support operations. Since
these strategic investments, including incremental nonrecurring
operating costs, will cease at the end of the investment period,
are not expected to recur in the foreseeable future, and are not
considered representative of our underlying operating performance,
management believes presenting these costs as an adjustment in the
non-GAAP results provides additional information to investors about
trends in our operations and is useful for period-over-period
comparisons. This presentation also allows investors to view our
underlying operating results in the same manner as they are viewed
by management.
We discuss below details of the non-GAAP financial measures
presented by us and provide reconciliations of these non-GAAP
financial measures to the most directly comparable financial
measures calculated in accordance with GAAP.
Consolidated Adjusted EBITDA and
Adjusted EBITDA
WestRock uses the non-GAAP financial measure “Consolidated
Adjusted EBITDA”, along with other factors such as “Adjusted
EBITDA” (a measure of performance the Company uses to evaluate
segment results in accordance with Accounting Standards
Codification 280 (“ASC 280”)), to evaluate our overall
performance. Management believes that the most directly comparable
GAAP measure to “Consolidated Adjusted EBITDA” is “Net income
(loss) attributable to common stockholders”. It can also be derived
by adding together each segment’s “Adjusted EBITDA” plus
“Non-allocated expenses”. Management believes this measure provides
WestRock’s management, board of directors, investors, potential
investors, securities analysts and others with useful information
to evaluate WestRock’s performance because it excludes
restructuring and other costs, impairment of goodwill and other
assets, business systems transformation costs and other specific
items that management believes are not indicative of the ongoing
operating results of the business. WestRock’s management and board
use this information to evaluate WestRock’s performance relative to
other periods.
Adjusted EBITDA, a measure of segment performance in accordance
with ASC 280, is defined as pretax earnings of a reportable segment
before depreciation, depletion and amortization, and excludes the
following items the Company does not consider part of our segment
performance: gain on sale of certain closed facilities,
multiemployer pension withdrawal income, restructuring and other
costs, impairment of goodwill and other assets, non-allocated
expenses, interest expense, net, loss on extinguishment of debt,
other income (expense), net, and other adjustments - each as
outlined in the table on page 6 ("Adjusted EBITDA"). The
composition of Adjusted EBITDA is not addressed or prescribed by
GAAP.
Adjusted Segment Sales and Adjusted
EBITDA Margin, Excluding Trade Sales
WestRock uses the non-GAAP financial measures “Adjusted Segment
Sales” and “Adjusted EBITDA Margin, excluding trade sales”.
Management believes that adjusting segment sales for trade sales is
consistent with how our peers present their sales for purposes of
computing segment margins and helps WestRock’s management, board of
directors, investors, potential investors, securities analysts and
others compare companies in the same peer group. Management
believes that the most directly comparable GAAP measure to
“Adjusted Segment Sales” is “segment sales”. Additionally, the most
directly comparable GAAP measure to “Adjusted EBITDA Margin,
excluding trade sales” is “Adjusted EBITDA Margin”. “Adjusted
EBITDA Margin, excluding trade sales” is calculated by dividing
that segment’s Adjusted EBITDA by Adjusted Segment Sales. “Adjusted
EBITDA Margin” is a profitability measure in accordance with ASC
280, and it is calculated for each segment by dividing that
segment’s Adjusted EBITDA by segment sales.
Adjusted Net Income and Adjusted
Earnings Per Diluted Share
WestRock uses the non-GAAP financial measures “Adjusted Net
Income” and “Adjusted Earnings Per Diluted Share”. Management
believes these measures provide WestRock’s management, board of
directors, investors, potential investors, securities analysts and
others with useful information to evaluate WestRock’s performance
because they exclude restructuring and other costs, impairment of
goodwill and other assets, business systems transformation costs
and other specific items that management believes are not
indicative of the ongoing operating results of the business.
WestRock and its board of directors use this information to
evaluate WestRock’s performance relative to other periods. WestRock
believes that the most directly comparable GAAP measures to
Adjusted Net Income and Adjusted Earnings Per Diluted Share are Net
income (loss) attributable to common stockholders and Earnings
(loss) per diluted share, respectively.
Adjusted Net Debt
WestRock uses the non-GAAP financial measure “Adjusted Net
Debt”. Management believes this measure provides WestRock’s board
of directors, investors, potential investors, securities analysts
and others with useful information to evaluate WestRock’s repayment
of debt relative to other periods because it includes or excludes
certain items management believes are not comparable from period to
period. We believe “Adjusted Net Debt” provides greater
comparability across periods by adjusting for cash and cash
equivalents, as well as fair value of debt step-up included in
Total Debt that is not subject to debt repayment. WestRock believes
that the most directly comparable GAAP measure is “Total Debt”
which is the sum of the current portion of debt and long-term debt
due after one year.
This release includes reconciliations of our non-GAAP financial
measures to their respective directly comparable GAAP measures, as
identified above, for the periods indicated (in millions, except
percentages and dollars per share).
Reconciliations of Consolidated
Adjusted EBITDA
Three Months Ended June 30,
2023
2022
Net income attributable to common stockholders
$
202.0
$
377.9
Adjustments: (1) Less: Net Income
attributable to noncontrolling interests
1.1
1.9
Income tax expense
67.3
132.7
Other (income) expense, net
(1.4
)
7.2
Interest expense, net
108.1
78.5
Restructuring and other costs
47.7
0.6
Impairment of goodwill and other assets
-
26.0
Multiemployer pension withdrawal income
(12.2
)
-
Depreciation, depletion and amortization
382.5
377.3
Other adjustments
6.8
3.4
Consolidated Adjusted EBITDA
$
801.9
$
1,005.5
(1) Schedule adds back expense or subtracts income for
certain financial statement and segment footnote items to compute
Consolidated Adjusted EBITDA.
Reconciliations of Adjusted Net
Income
Three
Months Ended June 30, 2023
Pre-Tax Tax Net of Tax As reported (1)
$
270.4
$
(67.3
)
$
203.1
Restructuring and other costs
47.6
(11.6
)
36.0
Business systems transformation costs (2)
22.6
(5.6
)
17.0
Losses at closed facilities (2)
8.3
(2.1
)
6.2
Gain on sale of unconsolidated entity (2)
(19.2
)
2.0
(17.2
)
Multiemployer pension withdrawal income
(12.2
)
3.0
(9.2
)
Brazil indirect tax claim (2)
(9.1
)
3.1
(6.0
)
Gain on sale of two uncoated recycled paperboard mills
(0.1
)
-
(0.1
)
Adjusted Results
$
308.3
$
(78.5
)
$
229.8
Noncontrolling interests
(1.1
)
Adjusted Net Income
$
228.7
(1)
The as reported results for Pre-Tax, Tax
and Net of Tax are equivalent to the line items "Income (loss)
before income taxes", "Income tax (expense) benefit" and
"Consolidated net income (loss)", respectively, as reported on the
Consolidated Statements of Operations.
(2)
These footnoted items are the “Other
adjustments” called out in the Segment Information table on page 6.
The “Losses at closed facilities” line includes $0.5 million of
depreciation and amortization, and the Brazil indirect tax claim
includes $4.7 million of interest income.
Three
Months Ended June 30, 2022
Pre-Tax Tax Net of Tax As reported (1)
$
512.5
$
(132.7
)
$
379.8
Mineral rights impairment
26.0
(6.4
)
19.6
Accelerated depreciation on certain closed facilities
7.5
(1.9
)
5.6
Losses at closed facilities (2)
3.7
(0.8
)
2.9
Restructuring and other costs
0.6
(0.1
)
0.5
MEPP liability adjustment due to interest rates
(12.7
)
3.1
(9.6
)
Other
(0.9
)
0.2
(0.7
)
Adjusted Results
$
536.7
$
(138.6
)
$
398.1
Noncontrolling interests
(1.9
)
Adjusted Net Income
$
396.2
(1)
The as reported results for Pre-Tax, Tax
and Net of Tax are equivalent to the line items "Income (loss)
before income taxes", "Income tax (expense) benefit" and
"Consolidated net income (loss)", respectively, as reported on the
Consolidated Statements of Operations.
(2)
This footnoted item is the “Other
adjustments” called out in the Segment Information table on page 6.
The “Losses at closed facilities” line includes $0.3 million of
depreciation and amortization.
Reconciliations of Adjusted Earnings
Per Diluted Share
Three Months Ended June 30,
2023
2022
Earnings per diluted share
$
0.79
$
1.47
Restructuring and other costs
0.14
-
Business systems transformation costs
0.07
-
Losses at closed facilities
0.02
0.01
Mineral rights impairment
-
0.08
Accelerated depreciation on certain closed facilities
-
0.02
Gain on sale of unconsolidated entity
(0.07
)
-
Multiemployer pension withdrawal income
(0.04
)
-
Brazil indirect tax claim
(0.02
)
-
MEPP liability adjustment due to interest rates
-
(0.04
)
Adjusted Earnings Per Diluted Share
$
0.89
$
1.54
Reconciliations of Adjusted Segment
Sales and Adjusted EBITDA Margin, Excluding Trade
Sales
Corrugated Packaging Segment
Three Months Ended June 30,
2023
2022
Segment sales
$
2,565.7
$
2,382.5
Less: Trade Sales
(90.9)
(84.0)
Adjusted Segment Sales
$
2,474.8
$
2,298.5
Adjusted EBITDA
$
429.7
$
385.2
Adjusted EBITDA Margin
16.7%
16.2%
Adjusted EBITDA Margin, excluding Trade Sales
17.4%
16.8%
Reconciliation of Total Debt to
Adjusted Net Debt
June 2023 Current portion of
debt
$
419.4
Long-term debt due after one year
8,607.6
Total debt
9,027.0
Less: Cash and cash equivalents
(314.8
)
Less: Fair value of debt step-up
(161.6
)
Adjusted Net Debt
$
8,550.6
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230802467361/en/
Investors: Robert Quartaro, 470-328-6979 Senior Vice President,
Investor Relations robert.quartaro@westrock.com
Media: Robby Johnson, 470-328-6397 Manager, Corporate
Communications s-crp-mediainquiries@westrock.com
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