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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2022

or

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to ______

Commission File Number 001-38736

WestRock Company

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

37-1880617

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1000 Abernathy Road NE, Atlanta, Georgia

 

30328

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (770) 448-2193

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

WRK

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

Class

 

Outstanding as of May 3, 2022

Common Stock, $0.01 par value

 

254,851,968

 

 

 


 

WESTROCK COMPANY

INDEX

 

 

 

 

Page

PART I

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Income for the three and six months ended March 31, 2022 and 2021

3

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2022 and 2021

4

 

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2022 and September 30, 2021

5

 

 

 

 

Condensed Consolidated Statements of Equity for the three and six months ended March 31, 2022 and 2021

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2022 and 2021

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

52

 

 

 

Item 4.

Controls and Procedures

52

 

 

 

PART II

OTHER INFORMATION

53

 

 

 

Item 1.

Legal Proceedings

53

 

 

 

Item 1A.

Risk Factors

53

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

53

 

 

 

Item 6.

Exhibits

53

 

 

 

 

Index to Exhibits

54

 

2


 

PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (UNAUDITED)

WESTROCK COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

(In millions, except per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

5,382.1

 

 

$

4,437.8

 

 

$

10,334.3

 

 

$

8,839.3

 

Cost of goods sold

 

 

4,378.4

 

 

 

3,688.2

 

 

 

8,534.0

 

 

 

7,336.8

 

Gross profit

 

 

1,003.7

 

 

 

749.6

 

 

 

1,800.3

 

 

 

1,502.5

 

Selling, general and administrative, excluding
   intangible amortization

 

 

493.1

 

 

 

458.4

 

 

 

946.0

 

 

 

876.2

 

Selling, general and administrative intangible
   amortization

 

 

88.1

 

 

 

88.6

 

 

 

176.1

 

 

 

180.5

 

Loss (gain) on disposal of assets

 

 

2.5

 

 

 

0.3

 

 

 

(11.4

)

 

 

2.8

 

Multiemployer pension withdrawal income

 

 

 

 

 

 

 

 

(3.3

)

 

 

 

Restructuring and other costs

 

 

363.4

 

 

 

5.2

 

 

 

365.7

 

 

 

12.9

 

Operating profit

 

 

56.6

 

 

 

197.1

 

 

 

327.2

 

 

 

430.1

 

Interest expense, net

 

 

(72.5

)

 

 

(83.5

)

 

 

(159.2

)

 

 

(177.3

)

Loss on extinguishment of debt

 

 

(8.2

)

 

 

 

 

 

(8.2

)

 

 

(1.1

)

Pension and other postretirement non-service income

 

 

39.7

 

 

 

35.0

 

 

 

79.6

 

 

 

69.9

 

Other income (expense), net

 

 

6.3

 

 

 

(13.4

)

 

 

6.5

 

 

 

7.4

 

Equity in income of unconsolidated entities

 

 

20.6

 

 

 

9.7

 

 

 

39.0

 

 

 

18.7

 

Income before income taxes

 

 

42.5

 

 

 

144.9

 

 

 

284.9

 

 

 

347.7

 

Income tax expense

 

 

(1.8

)

 

 

(30.5

)

 

 

(60.4

)

 

 

(80.8

)

Consolidated net income

 

 

40.7

 

 

 

114.4

 

 

 

224.5

 

 

 

266.9

 

Less: Net income attributable to noncontrolling
   interests

 

 

(0.8

)

 

 

(1.9

)

 

 

(2.3

)

 

 

(2.4

)

Net income attributable to common stockholders

 

$

39.9

 

 

$

112.5

 

 

$

222.2

 

 

$

264.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share attributable to common
   stockholders

 

$

0.15

 

 

$

0.42

 

 

$

0.84

 

 

$

1.00

 

Diluted earnings per share attributable to common
   stockholders

 

$

0.15

 

 

$

0.42

 

 

$

0.83

 

 

$

0.99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 

263.4

 

 

 

264.9

 

 

 

264.0

 

 

 

263.8

 

Diluted weighted average shares outstanding

 

 

265.3

 

 

 

267.0

 

 

 

266.1

 

 

 

265.9

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

3


 

WESTROCK COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

(In millions)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income

 

$

40.7

 

 

$

114.4

 

 

$

224.5

 

 

$

266.9

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

 

129.7

 

 

 

(87.2

)

 

 

113.4

 

 

 

109.7

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred loss on cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

(0.1

)

Reclassification adjustment of net loss on
  cash flow hedges included in earnings

 

 

 

 

 

1.4

 

 

 

 

 

 

2.9

 

Defined benefit pension and other postretirement
   benefit plans:

 

 

 

 

 

 

 

 

 

 

 

 

Net actuarial gain arising during period

 

 

0.1

 

 

 

 

 

 

0.1

 

 

 

 

Amortization and settlement recognition of net
   actuarial loss, included in pension cost

 

 

1.5

 

 

 

5.8

 

 

 

2.8

 

 

 

11.4

 

Amortization and settlement recognition of prior
   service cost, included in pension cost

 

 

1.5

 

 

 

1.0

 

 

 

2.9

 

 

 

2.1

 

Other comprehensive income (loss), net of tax

 

 

132.8

 

 

 

(79.0

)

 

 

119.2

 

 

 

126.0

 

Comprehensive income

 

 

173.5

 

 

 

35.4

 

 

 

343.7

 

 

 

392.9

 

Less: Comprehensive income attributable to
   noncontrolling interests

 

 

(1.1

)

 

 

(1.9

)

 

 

(2.6

)

 

 

(2.8

)

Comprehensive income attributable to common
   stockholders

 

$

172.4

 

 

$

33.5

 

 

$

341.1

 

 

$

390.1

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

4


 

WESTROCK COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions, except per share data)

 

March 31,
2022

 

 

September 30,
2021

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

360.2

 

 

$

290.9

 

Accounts receivable (net of allowances of $73.8 and $68.1)

 

 

2,841.9

 

 

 

2,586.9

 

Inventories

 

 

2,233.5

 

 

 

2,173.3

 

Other current assets

 

 

545.9

 

 

 

597.6

 

Assets held for sale

 

 

4.4

 

 

 

10.9

 

Total current assets

 

 

5,985.9

 

 

 

5,659.6

 

Property, plant and equipment, net

 

 

10,237.4

 

 

 

10,570.1

 

Goodwill

 

 

5,969.3

 

 

 

5,959.2

 

Intangibles, net

 

 

3,143.6

 

 

 

3,318.8

 

Restricted assets held by special purpose entities

 

 

1,256.8

 

 

 

1,260.5

 

Prepaid pension asset

 

 

738.0

 

 

 

674.3

 

Other assets

 

 

1,874.6

 

 

 

1,811.8

 

Total Assets

 

$

29,205.6

 

 

$

29,254.3

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of debt

 

$

419.6

 

 

$

168.8

 

Accounts payable

 

 

2,219.0

 

 

 

2,123.7

 

Accrued compensation and benefits

 

 

509.8

 

 

 

656.8

 

Other current liabilities

 

 

763.4

 

 

 

694.8

 

Total current liabilities

 

 

3,911.8

 

 

 

3,644.1

 

Long-term debt due after one year

 

 

7,954.4

 

 

 

8,025.3

 

Pension liabilities, net of current portion

 

 

245.6

 

 

 

254.7

 

Postretirement benefit liabilities, net of current portion

 

 

138.6

 

 

 

133.7

 

Non-recourse liabilities held by special purpose entities

 

 

1,122.6

 

 

 

1,127.3

 

Deferred income taxes

 

 

2,850.9

 

 

 

2,944.4

 

Other long-term liabilities

 

 

1,380.4

 

 

 

1,433.1

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

4.2

 

 

 

1.7

 

Equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value; 30.0 million shares authorized; no
   shares outstanding

 

 

 

 

 

 

Common Stock, $0.01 par value; 600.0 million shares authorized;
   
259.3 million and 265.0 million shares outstanding at March 31,
   2022 and September 30, 2021, respectively

 

 

2.6

 

 

 

2.7

 

Capital in excess of par value

 

 

10,793.5

 

 

 

11,058.8

 

Retained earnings

 

 

1,662.5

 

 

 

1,607.9

 

Accumulated other comprehensive loss

 

 

(880.2

)

 

 

(999.1

)

Total stockholders’ equity

 

 

11,578.4

 

 

 

11,670.3

 

Noncontrolling interests

 

 

18.7

 

 

 

19.7

 

Total equity

 

 

11,597.1

 

 

 

11,690.0

 

Total Liabilities and Equity

 

$

29,205.6

 

 

$

29,254.3

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

5


 

WESTROCK COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

(In millions, except per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Number of Shares of Common Stock Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

263.2

 

 

 

263.3

 

 

 

265.0

 

 

 

260.4

 

Issuance of common stock, net of stock received for
   tax withholdings

 

 

1.2

 

 

 

2.6

 

 

 

1.5

 

 

 

5.5

 

Purchases of common stock

 

 

(5.1

)

 

 

 

 

 

(7.2

)

 

 

 

Balance at end of period

 

 

259.3

 

 

 

265.9

 

 

 

259.3

 

 

 

265.9

 

Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

2.6

 

 

$

2.6

 

 

$

2.7

 

 

$

2.6

 

Issuance of common stock, net of stock received for
   tax withholdings

 

 

 

 

 

0.1

 

 

 

 

 

 

0.1

 

Purchases of common stock

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

Balance at end of period

 

 

2.6

 

 

 

2.7

 

 

 

2.6

 

 

 

2.7

 

Capital in Excess of Par Value:

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

10,996.1

 

 

 

10,949.4

 

 

 

11,058.8

 

 

 

10,916.3

 

Compensation expense under share-based plans

 

 

24.5

 

 

 

31.0

 

 

 

39.7

 

 

 

50.9

 

Issuance of common stock, net of stock received for
   tax withholdings

 

 

(13.2

)

 

 

77.1

 

 

 

(4.5

)

 

 

90.3

 

Purchases of common stock

 

 

(213.9

)

 

 

 

 

 

(300.1

)

 

 

 

Other

 

 

 

 

 

 

 

 

(0.4

)

 

 

 

Balance at end of period

 

 

10,793.5

 

 

 

11,057.5

 

 

 

10,793.5

 

 

 

11,057.5

 

Retained Earnings:

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

1,711.2

 

 

 

1,126.3

 

 

 

1,607.9

 

 

 

1,031.6

 

Adoption of accounting standards (1)

 

 

 

 

 

 

 

 

 

 

 

(3.8

)

Net income attributable to common stockholders

 

 

39.9

 

 

 

112.5

 

 

 

222.2

 

 

 

264.5

 

Dividends declared (per share - $0.25, $0.20, $0.50
   and $
0.40) (2)

 

 

(66.1

)

 

 

(52.6

)

 

 

(133.7

)

 

 

(106.1

)

Issuance of common stock, net of stock received for
   tax withholdings

 

 

(1.8

)

 

 

(0.2

)

 

 

(