WestRock Company (NYSE:WRK), a leading provider of sustainable
paper and packaging solutions, today announced results for its
fiscal second quarter ended March 31, 2023.
Second Quarter Highlights and other notable items:
- Net sales of $5.3 billion
- Net loss of $2.0 billion, included a $1.9 billion pre-tax,
non-cash goodwill impairment and $445 million of pre-tax
restructuring and other costs; Adjusted Net Income of $198
million
- Simplifying our portfolio to streamline our business, improve
performance and deliver best-in-class returns
- Consolidated Adjusted EBITDA of $789 million; Corrugated
Packaging and Consumer Packaging segments Adjusted EBITDA increased
24.0% and 6.2% year-over-year, respectively
- Results negatively impacted by $58 million due to economic
downtime, as well as a $40 million increase in non-cash pension
costs year-over-year; our U.S. qualified and non-qualified pension
plans remain overfunded
- Loss per diluted share of $7.85 and Adjusted Earnings per
Diluted Share of $0.77
“The WestRock team delivered a solid second quarter,
demonstrating the strength of our integrated and diversified
packaging business,” said David B. Sewell, chief executive officer.
“Our broad portfolio, product innovations and self-help initiatives
are enabling us to successfully navigate the current market
challenges.
“Closing our North Charleston mill is another step in our
ongoing portfolio optimization strategy. We are accelerating our
efforts to streamline our operations and drive growth in the most
attractive markets. Looking ahead, we remain committed to operating
world class assets and investing our capital to drive the greatest
returns.”
Consolidated Financial Results
WestRock’s performance for the three months ended March 31, 2023
and 2022 (in millions):
Three Months Ended Mar. 31, 2023 Mar. 31, 2022 $ Var. % Var.
Net sales
$
5,277.6
$
5,382.1
$
(104.5
)
-1.9
%
Net (loss) income
$
(2,006.1
)
$
39.9
$
(2,046.0
)
nm
Consolidated Adjusted EBITDA
$
788.6
$
853.9
$
(65.3
)
-7.6
%
Net sales decreased $105 million, or 1.9%, year-over-year driven
by a $370 million, or 24%, decrease in Global Paper segment sales
that were partially offset by a $308 million, or 13.3%, increase in
Corrugated Packaging segment sales. Net sales in the current year
quarter included $328 million related to the consolidation of
Gondi, S.A. de C.V. (“Grupo Gondi” and “Grupo Gondi
Acquisition”).
The net loss in the second quarter of fiscal 2023 was primarily
due to the $1.9 billion pre-tax, non-cash goodwill impairment and
higher restructuring and other costs. The net loss was also
impacted by lower volumes excluding the Grupo Gondi Acquisition,
increased net cost inflation, economic downtime, increased non-cash
pension costs, costs associated with the Mahrt mill work stoppage,
and business systems transformation costs. These costs were
partially offset by higher selling price/mix, cost savings and
contribution from the Grupo Gondi Acquisition.
Consolidated Adjusted EBITDA decreased $65 million, or 7.6%,
year-over-year, primarily due to lower Global Paper and
Distribution segment Adjusted EBITDA that was partially offset by
higher Adjusted EBITDA in our Corrugated Packaging and Consumer
Packaging segments. The Adjusted EBITDA impact of the Grupo Gondi
operations contributed an incremental $50 million compared to the
prior year quarter.
Additional information about the changes in segment sales and
Adjusted EBITDA by segment are included below.
Goodwill Impairment
During the second quarter of fiscal 2023 we recorded a $1.9
billion pre-tax, non-cash goodwill impairment (or $1.8 billion
after-tax); $1.4 million in Global Paper and $514 million in our
Corrugated Packaging reportable segment. The goodwill impairment
was linked to prior acquisitions and driven by the sustained
decrease in the Company’s market capitalization and further
deterioration of macroeconomic conditions, including the impact of
soft demand, pricing pressure and elevated inflation, which
negatively affected our long-term forecasts in certain segments, as
well as certain higher discount rates.
Restructuring and Other Costs
Restructuring and other costs during the second quarter of
fiscal 2023 were $445 million ($347 million of which was non-cash),
and were primarily related to the decision to close our North
Charleston paper mill. Restructuring and other costs during the
second quarter of fiscal 2022 were $363 million ($321 million of
which was non-cash), primarily related to the closure of the Panama
City, Florida paper mill.
Cash Flow Activities
Net cash provided by operating activities was $284 million in
the second quarter of fiscal 2023 compared to $390 million in the
prior year quarter primarily due to lower earnings.
Total debt was $9.5 billion at March 31, 2023, $9.3 billion
excluding $166 million of unamortized fair market value step-up of
debt acquired in mergers and acquisitions, and $9.0 billion after
further excluding cash and cash equivalents of $363 million. Total
debt was largely unchanged compared to last quarter. The Company
had approximately $3.2 billion of available liquidity from
long-term committed credit facilities and cash and cash equivalents
at March 31, 2023.
During the second quarter of fiscal 2023, WestRock invested $282
million in capital expenditures and returned $70 million in capital
to stockholders in dividend payments.
Segment Results
We have included the financial results of the Grupo Gondi
operations in our Corrugated Packaging segment.
WestRock’s segment performance for the three months ended March
31, 2023 and 2022 was as follows (in millions):
Corrugated Packaging Segment
Three Months Ended Mar. 31, 2023 Mar. 31, 2022 Var. % Var.
Segment sales
$
2,627.4
$
2,319.0
$
308.4
13.3%
Adjusted EBITDA
$
407.5
$
328.7
$
78.8
24.0%
Adjusted EBITDA Margin
15.5%
14.2%
130 bps
Corrugated Packaging segment sales increased $308 million, or
13.3%, primarily due to $328 million of sales from the acquired
Grupo Gondi operations and higher selling price/mix that were
partially offset by lower volumes excluding the Grupo Gondi
Acquisition.
Corrugated Packaging Adjusted EBITDA increased $79 million, or
24.0%, primarily due to the incremental $50 million contribution
from the Grupo Gondi operations, the margin impact from higher
selling price/mix and cost savings, which were partially offset by
increased net cost inflation, lower volumes excluding the Grupo
Gondi Acquisition and economic downtime. Corrugated Packaging
Adjusted EBITDA margin was 15.5% and Adjusted EBITDA margin
excluding trade sales was 16.0%.
Consumer Packaging Segment
Three Months Ended Mar. 31, 2023 Mar. 31, 2022 Var. % Var.
Segment sales
$
1,265.1
$
1,250.6
$
14.5
1.2%
Adjusted EBITDA
$
218.6
$
205.8
$
12.8
6.2%
Adjusted EBITDA Margin
17.3%
16.5%
80 bps
Consumer Packaging segment sales increased $15 million, or 1.2%,
primarily due to higher selling price/mix that was partially offset
by lower volumes and the unfavorable impact of foreign
currency.
Consumer Packaging Adjusted EBITDA increased $13 million, or
6.2%, primarily due to the margin impact from higher selling
price/mix and cost savings that were largely offset by increased
net cost inflation, lower volumes, increased non-cash pension costs
and the unfavorable impact of foreign currency. Consumer Packaging
Adjusted EBITDA margin was 17.3%.
Global Paper Segment
Three Months Ended Mar. 31, 2023 Mar. 31, 2022 Var. % Var.
Segment sales
$
1,168.2
$
1,538.1
$
(369.9)
-24.0%
Adjusted EBITDA
$
187.1
$
308.6
$
(121.5)
-39.4%
Adjusted EBITDA Margin
16.0%
20.1%
-410 bps
Global Paper segment sales decreased $370 million, or 24.0%,
primarily due to lower volumes that were partially offset by higher
selling price/mix. Additionally, segment sales are lower than the
prior year period as sales to Grupo Gondi are now eliminated.
Global Paper Adjusted EBITDA decreased $122 million, or 39.4%,
primarily due to lower volumes, increased net cost inflation,
economic downtime and increased non-cash pension costs, which were
partially offset by the margin impact from higher selling
price/mix. Global Paper Adjusted EBITDA margin was 16.0%.
Distribution Segment
Three Months Ended Mar. 31, 2023 Mar. 31, 2022 Var. % Var.
Segment sales
$
307.3
$
362.3
$
(55.0)
-15.2%
Adjusted EBITDA
$
9.3
$
28.0
$
(18.7)
-66.8%
Adjusted EBITDA Margin
3.0%
7.7%
-470 bps
Distribution segment sales decreased $55 million, or 15.2%,
primarily due to lower volumes that were partially offset by higher
selling price/mix. The volume in the prior year quarter included a
large healthcare order.
Distribution Adjusted EBITDA decreased $19 million, or 66.8%,
primarily due lower volumes and increased cost inflation that were
partially offset by cost savings and the margin impact of higher
selling price/mix.
Conference Call
WestRock will host a conference call to discuss its results of
operations for the fiscal second quarter ended March 31, 2023, and
other topics that may be raised during the discussion at 8:30 a.m.,
Eastern Time, on Thursday, May 4, 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 may contain 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 are typically identified by 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. Forward-looking
statements involve estimates, expectations, projections, goals,
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 Grupo Gondi 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 and productivity improvements and
risks associated with completing strategic projects on the
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
Item 1A “Risk Factors” in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2022, as well as the other risks
discussed 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 Six Months Ended March
31, March 31,
2023
2022
2023
2022
Net sales
$
5,277.6
$
5,382.1
$
10,200.7
$
10,334.3
Cost of goods sold
4,357.3
4,378.4
8,515.2
8,534.0
Gross profit
920.3
1,003.7
1,685.5
1,800.3
Selling, general and administrative expense excluding intangible
amortization
498.9
493.1
978.0
946.0
Selling, general and administrative intangible amortization expense
86.2
88.1
172.8
176.1
(Gain) loss on disposal of assets
(8.6
)
2.5
(10.3
)
(11.4
)
Multiemployer pension withdrawal income
-
-
-
(3.3
)
Restructuring and other costs
444.7
363.4
477.7
365.7
Goodwill impairment
1,893.0
-
1,893.0
-
Operating (loss) profit
(1,993.9
)
56.6
(1,825.7
)
327.2
Interest expense, net
(108.4
)
(72.5
)
(205.7
)
(159.2
)
Loss on extinguishment of debt
-
(8.2
)
-
(8.2
)
Pension and other postretirement non-service (cost) income
(6.0
)
39.7
(11.0
)
79.6
Other (expense) income, net
(17.8
)
6.3
7.4
6.5
Equity in income (loss) of unconsolidated entities
4.5
20.6
(31.5
)
39.0
(Loss) income before income taxes
(2,121.6
)
42.5
(2,066.5
)
284.9
Income tax benefit (expense)
116.8
(1.8
)
108.5
(60.4
)
Consolidated net (loss) income
(2,004.8
)
40.7
(1,958.0
)
224.5
Less: Net income attributable to noncontrolling interests
(1.3
)
(0.8
)
(2.8
)
(2.3
)
Net (loss) income attributable to common stockholders
$
(2,006.1
)
$
39.9
$
(1,960.8
)
$
222.2
Computation of diluted earnings per share under the
two-class method (in millions, except per share data): Net
(loss) income attributable to common stockholders
$
(2,006.1
)
$
39.9
$
(1,960.8
)
$
222.2
Less: Distributed and undistributed income available to
participating securities
-
(0.1
)
-
(0.1
)
Distributed and undistributed (loss) income available to common
stockholders
$
(2,006.1
)
$
39.8
$
(1,960.8
)
$
222.1
Diluted weighted average shares outstanding
255.6
265.3
255.2
266.1
Diluted (loss) earnings per share
$
(7.85
)
$
0.15
$
(7.68
)
$
0.83
WestRock Company Segment Information In millions
(unaudited)
Three Months Ended Six Months
Ended March 31, March 31,
2023
2022
2023
2022
Net sales: Corrugated Packaging
$
2,627.4
$
2,319.0
$
4,964.8
$
4,539.0
Consumer Packaging
1,265.1
1,250.6
2,480.1
2,389.3
Global Paper
1,168.2
1,538.1
2,291.8
2,890.7
Distribution
307.3
362.3
628.8
687.1
Intersegment Eliminations
(90.4
)
(87.9
)
(164.8
)
(171.8
)
Total
$
5,277.6
$
5,382.1
$
10,200.7
$
10,334.3
Adjusted EBITDA: Corrugated Packaging
$
407.5
$
328.7
$
736.9
$
617.6
Consumer Packaging
218.6
205.8
401.9
375.1
Global Paper
187.1
308.6
344.4
541.0
Distribution
9.3
28.0
20.1
34.5
Total
822.5
871.1
1,503.3
1,568.2
Depreciation, depletion and amortization
(395.8
)
(373.6
)
(769.0
)
(740.1
)
Gain on sale of certain closed facilities
8.9
-
9.8
14.4
Multiemployer pension withdrawal income
-
-
-
3.3
Restructuring and other costs
(444.7
)
(363.4
)
(477.7
)
(365.7
)
Goodwill impairment
(1,893.0
)
-
(1,893.0
)
-
Non-allocated expenses
(33.9
)
(17.2
)
(62.6
)
(34.0
)
Interest expense, net
(108.4
)
(72.5
)
(205.7
)
(159.2
)
Loss on extinguishment of debt
-
(8.2
)
-
(8.2
)
Other (expense) income, net
(17.8
)
6.3
7.4
6.5
Other adjustments
(59.4
)
-
(179.0
)
(0.3
)
(Loss) income before income taxes
$
(2,121.6
)
$
42.5
$
(2,066.5
)
$
284.9
Depreciation, depletion and amortization: Corrugated
Packaging
$
211.2
$
166.9
$
403.4
$
333.9
Consumer Packaging
85.5
90.1
169.6
176.4
Global Paper
91.2
109.8
180.3
216.0
Distribution
6.9
5.8
13.8
11.6
Corporate
1.0
1.0
1.9
2.2
Total
$
395.8
$
373.6
$
769.0
$
740.1
Other adjustments: Corrugated Packaging
$
4.7
$
(6.4
)
$
54.5
$
(6.4
)
Consumer Packaging
28.0
7.5
59.6
7.7
Global Paper
9.1
(1.1
)
26.6
(1.0
)
Corporate
17.6
-
38.3
-
Total
$
59.4
$
(0.0
)
$
179.0
$
0.3
WestRock Company Consolidated Statements of Cash
Flows In millions (unaudited)
Three Months Ended Six
Months Ended March 31, March 31,
2023
2022
2023
2022
Cash flows from operating activities: Consolidated net
(loss) income
$
(2,004.8
)
$
40.7
$
(1,958.0
)
$
224.5
Adjustments to reconcile consolidated net income to net cash
provided by operating activities: Depreciation, depletion and
amortization
395.8
373.6
769.0
740.1
Deferred income tax benefit
(220.1
)
(86.0
)
(239.6
)
(100.0
)
Share-based compensation expense
13.5
24.5
23.1
39.7
401(k) match and company contribution in common stock
-
-
-
2.5
Pension and other postretirement funding more (less) than cost
(income)
4.6
(34.9
)
8.2
(67.3
)
Cash surrender value increase in excess of premiums paid
(12.3
)
1.6
(25.4
)
(15.0
)
Equity in (income) loss of unconsolidated entities
(4.5
)
(20.6
)
31.5
(39.0
)
Gain on sale of businesses
-
-
(11.1
)
-
Goodwill impairment
1,893.0
-
1,893.0
-
Other impairment adjustments
388.4
321.2
387.7
322.1
(Gain) loss on disposal of plant and equipment and other, net
(7.9
)
2.4
(9.6
)
(11.5
)
Other, net
(15.0
)
(0.2
)
(14.3
)
5.3
Changes in operating assets and liabilities, net of acquisitions /
divestitures: Accounts receivable
(114.6
)
(289.5
)
170.3
(229.1
)
Inventories
9.0
(15.9
)
(44.8
)
(133.4
)
Other assets
14.6
(108.3
)
(49.7
)
(152.4
)
Accounts payable
(100.4
)
58.9
(214.3
)
64.3
Income taxes
46.5
41.0
46.7
103.0
Accrued liabilities and other
(1.7
)
81.4
(212.7
)
(111.1
)
Net cash provided by operating activities
284.1
389.9
550.0
642.7
Investing activities: Capital expenditures
(281.5
)
(181.0
)
(563.7
)
(354.1
)
Cash paid for purchase of businesses, net of cash acquired
-
-
(853.5
)
(7.0
)
Proceeds from corporate owned life insurance
4.5
25.7
6.7
27.7
Proceeds from sale of businesses
-
-
25.9
-
Proceeds from currency forward contracts
-
-
23.2
-
Proceeds from sale of property, plant and equipment
14.2
0.6
18.7
23.0
Proceeds from property, plant and equipment insurance settlement
-
-
-
1.7
Other, net
(0.5
)
2.9
(0.8
)
2.1
Net cash used for investing activities
(263.3
)
(151.8
)
(1,343.5
)
(306.6
)
Financing activities: Additions to revolving credit
facilities
32.1
-
42.3
-
Repayments of revolving credit facilities
-
(40.0
)
(116.3
)
(40.0
)
Additions to debt
(10.7
)
343.8
1,379.1
375.1
Repayments of debt
(6.0
)
(364.0
)
(516.7
)
(416.2
)
Changes in commercial paper, net
(10.1
)
224.6
291.4
224.6
Other debt additions (repayments), net
7.5
(64.2
)
(16.1
)
4.8
Issuances of common stock, net of related tax withholdings
(18.7
)
(15.4
)
(16.3
)
(9.2
)
Purchases of common stock
-
(210.1
)
-
(310.2
)
Cash dividends paid to stockholders
(70.3
)
(65.8
)
(140.3
)
(132.1
)
Other, net
0.9
7.6
0.5
15.4
Net cash (used for) provided by financing activities
(75.3
)
(183.5
)
907.6
(287.8
)
Effect of exchange rate changes on cash and cash equivalents, and
restricted cash
3.7
14.3
(2.0
)
21.0
Changes in cash and cash equivalents, and restricted cash in assets
held-for-sale
(1.0
)
-
(8.9
)
-
(Decrease) increase in cash and cash equivalents and restricted
cash
(51.8
)
68.9
103.2
69.3
Cash and cash equivalents, and restricted cash at beginning of
period
415.2
291.3
260.2
290.9
Cash and cash equivalents, and restricted cash at end of period
$
363.4
$
360.2
$
363.4
$
360.2
Supplemental disclosure of cash flow information:
Cash paid during the period for: Income taxes, net of refunds
$
57.6
$
45.9
$
86.2
$
55.8
Interest, net of amounts capitalized
$
145.4
$
119.2
$
213.5
$
176.0
WestRock Company Condensed Consolidated Balance
Sheets In millions (unaudited)
March 31,
September 30,
2023
2022
Assets Current assets: Cash and
cash equivalents
$
363.4
$
260.2
Accounts receivable (net of allowances of $67.0 and $66.3)
2,814.9
2,683.9
Inventories
2,550.3
2,317.1
Other current assets
1,700.5
689.8
Assets held for sale
169.2
34.4
Total current assets
7,598.3
5,985.4
Property, plant and equipment, net
11,163.0
10,081.4
Goodwill
4,253.0
5,895.2
Intangibles, net
2,759.1
2,920.6
Prepaid pension asset
463.4
440.3
Other noncurrent assets
1,973.6
3,082.6
Total Assets
$
28,210.4
$
28,405.5
Liabilities and Equity
Current liabilities: Current portion of debt
$
501.6
$
212.2
Accounts payable
2,176.8
2,252.1
Accrued compensation and benefits
433.6
627.9
Other current liabilities
1,789.7
810.6
Liabilities held for sale
65.8
-
Total current liabilities
4,967.5
3,902.8
Long-term debt due after one year
9,004.0
7,575.0
Pension liabilities, net of current portion
212.7
189.4
Postretirement medical liabilities, net of current portion
107.4
105.4
Deferred income taxes
2,605.7
2,761.9
Other noncurrent liabilities
1,644.1
2,445.8
Redeemable noncontrolling interests
7.9
5.5
Total stockholders' equity
9,643.4
11,402.0
Noncontrolling interests
17.7
17.7
Total Equity
9,661.1
11,419.7
Total Liabilities and Equity
$
28,210.4
$
28,405.5
Non-GAAP Financial Measures and
Reconciliations
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 GAAP measure of segment performance the Company uses to
evaluate our segment results), to evaluate our overall performance.
Management believes that the most directly comparable GAAP measure
to “Consolidated Adjusted EBITDA” is “Net (loss) income
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, goodwill impairment, 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 GAAP measure of segment performance, 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, goodwill impairment, non-allocated expenses, interest
expense, net, loss on extinguishment of debt, other (expense)
income, net, and other adjustments - each as outlined in the table
on page 7 ("Adjusted EBITDA").
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 GAAP profitability measure, 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, goodwill
impairment, 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 (loss) income
attributable to common stockholders.
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).
Reconciliations of Consolidated
Adjusted EBITDA
Three Months Ended March 31,
2023
2022
Net (loss) income attributable to common stockholders
$
(2,006.1
)
$
39.9
Adjustments: (1) Less: Net Income
attributable to noncontrolling interests
1.3
0.8
Income tax (benefit) expense
(116.8
)
1.8
Other expense (income), net
17.8
(6.3
)
Loss on extinguishment of debt
-
8.2
Interest expense, net
108.4
72.5
Restructuring and other costs
444.7
363.4
Goodwill impairment
1,893.0
-
Gain on sale of certain closed facilities
(8.9
)
-
Depreciation, depletion and amortization
395.8
373.6
Other adjustments
59.4
-
Consolidated Adjusted EBITDA
$
788.6
$
853.9
(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 March 31, 2023
Consolidated Results Pre-Tax Tax Net of Tax As
reported (1)
$
(2,121.6)
$
116.8
$
(2,004.8)
Goodwill impairment
1,893.0
(63.2)
1,829.8
Restructuring and other costs
444.7
(109.1)
335.6
Mahrt mill work stoppage (2)
36.2
(8.9)
27.3
Business systems transformation costs (2)
17.5
(4.3)
13.2
Acquisition accounting inventory related adjustments (2)
4.6
(1.1)
3.5
Losses at closed facilities (2)
1.2
(0.3)
0.9
Gain on sale of certain closed facilities
(8.9)
2.2
(6.7)
Other (2)
0.1
-
0.1
Adjusted Results
$
266.8
$
(67.9)
$
198.9
Noncontrolling interests
(1.3)
Adjusted Net Income
$
197.6
(1)
The as reported results for Pre-Tax, Tax
and Net of Tax are equivalent to the line items "(Loss) income
before income taxes", "Income tax benefit (expense)" and
"Consolidated net (loss) income", 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 7.
The “Losses at closed facilities” line includes $0.2 million of
depreciation and amortization.
Three
Months Ended March 31, 2022
Consolidated Results Pre-Tax Tax Net of Tax As
reported (1)
$
42.5
$
(1.8)
$
40.7
Restructuring and other costs
363.4
(89.1)
274.3
Loss on extinguishment of debt
8.2
(2.0)
6.2
Losses at closed facilities (2)
0.1
(0.1)
-
MEPP liability adjustment due to interest rates
(14.6)
3.6
(11.0)
Adjusted Results
$
399.6
$
(89.4)
$
310.2
Noncontrolling interests
(0.8)
Adjusted Net Income
$
309.4
(1)
The as reported results for Pre-Tax, Tax
and Net of Tax are equivalent to the line items "(Loss) income
before income taxes", "Income tax benefit (expense)” and
“Consolidated net (loss) income", 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 7.
The “Losses at closed facilities” line includes $0.1 million of
depreciation and amortization.
Reconciliations of Adjusted Earnings
Per Diluted Share
Three Months Ended March 31,
2023
2022
(Loss) earnings per diluted share
$
(7.85
)
$
0.15
Goodwill impairment
7.16
-
Restructuring and other costs
1.32
1.04
Mahrt mill work stoppage
0.11
-
Business systems transformation costs
0.05
-
Acquisition accounting inventory related adjustments
0.01
-
Loss on extinguishment of debt
-
0.02
Gain on sale of certain closed facilities
(0.03
)
-
MEPP liability adjustment due to interest rates
-
(0.04
)
Adjusted Earnings Per Diluted Share
$
0.77
$
1.17
Reconciliations of Adjusted Segment
Sales and Adjusted EBITDA Margin, Excluding Trade
Sales
Corrugated Packaging Segment
Three Months Ended March 31,
2023
2022
Segment sales
$
2,627.4
$
2,319.0
Less: Trade Sales
(86.9
)
(86.7
)
Adjusted Segment Sales
$
2,540.5
$
2,232.3
Adjusted EBITDA
$
407.5
$
328.7
Adjusted EBITDA Margin
15.5
%
14.2
%
Adjusted EBITDA Margin, excluding Trade Sales
16.0
%
14.7
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230503005883/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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