ANNUAL
REPORT
2019
westrock.com
BOARD OF DIRECTORS
COLLEEN F. ARNOLD
Former Senior Vice President
IBM
Audit Committee, Finance Committee
TIMOTHY J. BERNLOHR
Managing Member
TJB Management Consulting, LLC
Compensation Committee, Executive Committee,
Nominating and Corporate Governance Committee
J. POWELL BROWN
President and Chief Executive Officer
Brown & Brown, Inc.
Audit Committee, Finance Committee
MICHAEL E. CAMPBELL
Former Chairman, President and
Chief Executive Officer
Arch Chemicals, Inc.
Compensation Committee,
Nominating and Corporate Governance Committee
TERRELL K. CREWS
Former Executive Vice President
and Chief Financial Officer
Monsanto Corporation
Audit Committee, Finance Committee
RUSSELL M. CURREY
President
Boxwood Capital, LLC
Audit Committee, Finance Committee
JOHN A. LUKE JR.
(Non-Executive Chairman)
Former Chairman and Chief Executive Officer
MeadWestvaco Corporation
Executive Committee
GRACIA C. MARTORE
Former President and Chief Executive Officer
TEGNA, Inc.
Audit Committee, Compensation Committee,
Executive Committee
JAMES E. NEVELS
Chairman
The Swarthmore Group
Finance Committee, Nominating and
Corporate Governance Committee
TIMOTHY H. POWERS
Former Chairman, President and
Chief Executive Officer
Hubbell, Inc.
Audit Committee, Compensation Committee
STEVEN C. VOORHEES
President and Chief Executive Officer
WestRock Company
Executive Committee
BETTINA M. WHYTE
President and Owner
Bettina Whyte Consultants, LLC
Compensation Committee, Executive Committee,
Nominating and Corporate Governance Committee
ALAN D. WILSON
(Lead Independent Director)
Former Chairman and Chief Executive Officer
McCormick & Company, Inc.
Executive Committee, Finance Committee,
Nominating and Corporate Governance Committee
LEADERSHIP
STEVEN C. VOORHEES
President and Chief Executive Officer
NINA E. BUTLER
Chief Environmental Officer
DONNA OWENS COX
Chief Communications Officer
AMIR A. KAZMI
Chief Information and Digital Officer
VICKI L. LOSTETTER
Chief Human Resources Officer
ROBERT B. MCINTOSH
Executive Vice President
General Counsel and
Secretary
MARK W. RUSSELL
Senior Vice President
Performance Excellence
and Safety
JEFFREY W. CHALOVICH
Chief Commercial Officer
and President
Corrugated Packaging
PETER C. DURETTE
Chief Strategy Officer
and Executive Vice President
Container
THOMAS M. STIGERS
Executive Vice President
Containerboard Mills
JAMES B. PORTER III
President
Business Development
and Latin America
JAIRO A. LORENZATTO
President
Brazil
PATRICK E. LINDNER
Chief Innovation Officer
and President
Consumer Packaging
ANTHONY P. MOLLICA
Executive Vice President
Consumer Mills
JOHN L. O’NEAL
Executive Vice President
Food and Beverage, Americas
MARC P. SHORE
President
Multi Packaging Solutions
PATRICK M. KIVITS
Executive Vice President
Multi Packaging Solutions
WARD H. DICKSON
Executive Vice President
and Chief Financial Officer
KELLY C. JANZEN
Senior Vice President
and Chief Accounting Officer
DANIEL P. MCNALLY
Chief Procurement Officer
WILLIAM A. MERRIGAN
Senior Vice President
Enterprise Logistics
TIMOTHY W. MURPHY
Senior Vice President
Finance
JOHN D. STAKEL
Senior Vice President
and Treasurer
Dear Fellow Stockholders:
The WestRock team made significant progress in fiscal 2019 toward achieving our
vision of becoming the premier partner and unrivaled provider of winning solutions
for our customers.
While the pace of change accelerated across the global economy and the markets and
customers that we serve, our team successfully managed through these changes. We
delivered solid operating performance, including generating $18.3 billion in net sales
and $3.2 billion in Adjusted Segment EBITDA. Adjusted Free Cash Flow exceeded $1
billion for the fourth consecutive year.
We completed the acquisition of KapStone Paper and Packaging Corporation and are
well on our way to capturing the more than $200 million in synergies and performance
improvements we expect to achieve as a result of the acquisition.
I believe that we will look back on 2019 as a seminal moment in the paper and
packaging industry. There has been a definitive shift in preference for sustainable
packaging; our stakeholders – customers, investors, teammates and communities
– are looking for companies that share their commitment to sustainable packaging
and business practices. WestRock shares this commitment, and our customers are
realizing the value our partnership and solutions can bring to helping them meet or
exceed their sustainability goals.
Steve Voorhees
President and Chief Executive Officer
The strength of WestRock’s differentiated and sustainable product portfolio is showing
in our results. We distinguish ourselves with high-quality board and design, and consistent delivery of value for our customers,
including the value we deliver through our machinery offerings. Our platform includes a scaled footprint with the industry’s broadest
portfolio of products and services. Our platform, combined with our commercial approach, supports our ability to meet the needs of
our customers and helps us achieve above-market organic growth rates and attractive Segment EBITDA margins.
Sustainable Packaging
Sustainability is becoming increasingly important to our customers, employees and business strategy. Our customers are setting short-
term and long-term goals for increasing their customers’ use of packaging that is recyclable, reusable and/or compostable, and we are
actively partnering with them in these efforts. Working together, we can help our customers achieve their goals and, at the same time,
do what’s right for the environment.
Sustainability is helping us drive innovation and spur fresh thinking that is leading to profitable growth. Since July 2018, we have
increased our annual run rate of sales by more than $100 million by replacing plastic in a wide variety of use cases. We are developing
innovative solutions to address our customers’ sustainability challenges, solutions that will enable us to grow our business and become
the leader in sustainable packaging.
Fiscal 2019 Highlights
Fiscal 2019 was marked by several key achievements. We increased net sales by 15%(1) to $18.3 billion and improved our operating
performance, which resulted in a 13% increase in Adjusted Segment EBITDA and a 20% increase in Net Cash Provided by Operating
Activities.
We grew our enterprise sales to $7.3 billion, or approximately 40% of our total net sales. These sales are to more than 150 customers
that buy at least $1 million from each of our corrugated and consumer packaging businesses, a measure that demonstrates the value of
our broad, differentiated portfolio. We have just begun to tap the value that our portfolio of paper, packaging and machinery solutions
can bring to our customers.
As noted, we completed the KapStone acquisition early in fiscal 2019. While most of the increase in net sales is attributable to the
acquisition, we grew our organic daily corrugated box shipments by 2.5%, compared to an industry growth rate for the same period of
0.5%. Our Corrugated Packaging team further improved margins, with North American Adjusted Segment EBITDA margin of 22% in
fiscal 2019.
We invested in the future of our Consumer Packaging business in fiscal 2019 with paper machine upgrades at our mills in Cottonton,
Alabama, and Covington, Virginia. These upgrades will improve operating efficiency, lower costs and enhance the quality of our
paperboard produced at these facilities. These investments, along with the sustainability-driven innovation that is underway, will
enhance the performance of our Consumer Packaging business.
We are allocating our strong cash flow to invest in the future, return capital to our stockholders and pay down debt. We invested $1.4
billion in capital expenditures in fiscal 2019, including $0.5 billion in strategic capital projects, such as our new box plant in Porto Feliz,
Brazil, which we believe is the largest and most efficient corrugated box plant in Latin America.
We returned $557 million to our stockholders in fiscal 2019 through dividends and stock repurchases. Because of our strong cash
flow and disciplined capital allocation strategy, we have returned more than $2 billion to our stockholders over the past four years. In
October, we increased our annual dividend by 2.2% to an annualized rate of $1.86 per share, an indication of our confidence in our
ongoing ability to generate strong cash flow for the long term.
We paid down $757 million in debt since the end of the first fiscal quarter to the end of fiscal 2019. We remain focused on returning to
our 2.25 to 2.50 times leverage target.
WestRock is unique in our ability to partner with our customers and provide solutions across our portfolio that solve their most critical
marketplace challenges. Demand for these types of solutions is growing, and we made two key appointments in 2019 to help build our
organization for the future.
We named Jeff Chalovich Chief Commercial Officer in addition to his role as president of Corrugated Packaging. Jeff’s leadership of our
overall commercial efforts enhances WestRock’s ability to maximize the value of our differentiated portfolio for our customers and our
stockholders.
We named Pat Lindner, who joined WestRock in 2019 as president of Consumer Packaging, to the additional role of Chief Innovation
Officer. He will also lead our sustainability efforts globally, ensuring that we continuously improve our environmental performance
and advance our sustainability platform. With Pat’s leadership, we are building our global innovation capabilities in materials science,
manufacturing services, products and solutions.
Fiscal 2020 Outlook
In fiscal 2020, we expect net sales to be between $18 billion and $18.5 billion, Adjusted Segment EBITDA to be in the range of $3
billion and $3.2 billion and Adjusted Free Cash Flow to be greater than $1 billion for the fifth consecutive year. We expect to invest
approximately $1.1 billion in capital to maintain and improve our mills and converting systems, including our strategic projects in
Florence, South Carolina, and Três Barras, Brazil.
Creating Our Future
WestRock combines the industry’s most comprehensive portfolio of sustainable, fiber-based paper and packaging with our industry-
leading expertise, insights and automated packaging systems to provide customized solutions that help our customers win in the
marketplace. As a company, we remain focused on nurturing a culture that is rooted in our Values of Integrity, Respect, Accountability
and Excellence.
We are moving from a period of growth by acquisition and investment in large strategic projects to a period of increased focus on
organic growth, sustainability, innovation, productivity and free cash flow generation. This focus, when combined with the dedication
and commitment to quality, service and safety by our more than 50,000 teammates worldwide, will create long-term value for our
customers, teammates and stockholders.
On behalf of the board of directors and all of us working together at WestRock, thank you for your investment in WestRock.
Sincerely,
Steve Voorhees
President and Chief Executive Officer
(1) Adjusted to exclude prior year recycling net sales.
The non-GAAP financial measures Adjusted Segment EBITDA, Adjusted Free Cash Flow and North American Adjusted Segment EBITDA margin
are referenced in this letter. See Appendix A for a discussion of our use of forward-looking statements and non-GAAP financial measures, including
reconciliations of those measures to GAAP financial measures.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2019
OR
(cid:4) 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
(State or Other Jurisdiction of
Incorporation or Organization)
1000 Abernathy Road NE, Atlanta, Georgia
(Address of Principal Executive Offices)
37-1880617
(I.R.S. Employer
Identification No.)
30328
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (770) 448-2193
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
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:3) (cid:2)No (cid:4)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:4)(cid:2)(cid:2)(cid:2)No (cid:3)
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 (cid:3) No (cid:4)
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 (cid:3) No (cid:4)
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 Act.
Large accelerated filer (cid:3)
Non-accelerated filer (cid:4)
Emerging growth company (cid:4)
Accelerated filer (cid:4)
Smaller reporting company (cid:4)
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. (cid:4)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:4) No (cid:3)
The aggregate market value of the common equity held by non-affiliates of the registrant as of March 31, 2019 (based on the closing price
per share as reported on the New York Stock Exchange on such date), was approximately $9,706 million.
As of November 4, 2019, the registrant had 257,894,507 shares of Common Stock, par value $0.01 per share, outstanding.
Portions of the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on January 31, 2020 are incorporated by
reference in Part III.
DOCUMENTS INCORPORATED BY REFERENCE
WESTROCK COMPANY
INDEX TO FORM 10-K
Page
Reference
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
PART I
PART II
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
PART III
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
PART IV
Item 15.
Exhibits and Financial Statement Schedules
Item 16.
Form 10-K Summary
2
3
17
27
27
29
29
30
30
33
50
54
147
147
148
149
150
150
150
150
151
151
Item 1.
BUSINESS
PART I
Unless the context otherwise requires, “we”, “us”, “our”, “WestRock” and “the Company” refer to the business
of WestRock Company, its wholly-owned subsidiaries and its partially-owned consolidated subsidiaries for periods
on or after November 2, 2018 and to WRKCo Inc. (formerly known as WestRock Company, “WRKCo”) for periods
prior to November 2, 2018.
General
WestRock is a multinational provider of paper and packaging solutions for consumer and corrugated
packaging markets. We partner with our customers to provide differentiated paper and packaging solutions that
help them win in the marketplace. Our team members support customers around the world from our operating and
business locations in North America, South America, Europe, Asia and Australia.
WestRock was formed on March 6, 2015 for the purpose of effecting the Combination (as defined below).
Pursuant to the second amended and restated business combination agreement, dated April 17, 2015 and
amended as of May 5, 2015 by and among WestRock, WestRock RKT Company (formerly known as Rock-Tenn
Company, and a wholly-owned subsidiary of WestRock) (“RockTenn”), WestRock MWV, LLC (formerly known as
MeadWestvaco Corporation, and a wholly-owned subsidiary of WestRock) (“MWV”), Rome Merger Sub, Inc. and
Milan Merger Sub, LLC (the “Business Combination Agreement”), on July 1, 2015, (i) Rome Merger Sub, Inc.
merged with and into RockTenn, with RockTenn surviving the merger as a wholly-owned subsidiary of WestRock,
and (ii) Milan Merger Sub, LLC merged with and into MWV, with MWV surviving the merger as a wholly owned
subsidiary of WestRock (the “Combination”). Prior to the Combination, WestRock did not conduct any activities
other than those incidental to its formation and the matters contemplated by the Business Combination
Agreement. On July 1, 2015, pursuant to the Business Combination Agreement, RockTenn and MWV completed a
strategic combination of their respective businesses and RockTenn and MWV each became wholly-owned
subsidiaries of WestRock. RockTenn was the accounting acquirer in the Combination.
On May 15, 2016, WestRock completed the distribution of the outstanding common stock, par value $0.01 per
share, of Ingevity Corporation, formerly the Specialty Chemicals business of WestRock to WestRock’s
stockholders (the “Separation”). As a result of the Separation, we disposed of our former Specialty Chemicals
segment in its entirety and ceased to consolidate its assets, liabilities and results of operations in our consolidated
financial statements. Accordingly, we presented the financial position and results of operations of our former
Specialty Chemicals segment as discontinued operations.
On April 6, 2017, we completed the sale (the “HH&B Sale”) of our Home, Health and Beauty business, a
former division of our Consumer Packaging segment (“HH&B”). We used the proceeds from the HH&B Sale in
connection with the MPS Acquisition (as defined below). We recorded a pre-tax gain on sale of HH&B of $192.8
million in fiscal 2017. See “Note 1. Description of Business and Summary of Significant Accounting Policies
— Description of Business” of the Notes to Consolidated Financial Statements for additional information.
On June 6, 2017, we completed the acquisition (the “MPS Acquisition”) of Multi Packaging Solutions
International Limited, a Bermuda exempted company (“MPS”). MPS is reported in our Consumer Packaging
segment. See “Note 3. Acquisitions and Investment” of the Notes to Consolidated Financial Statements for
additional information.
On November 2, 2018, pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of
January 28, 2018, among WRKCo, KapStone Paper and Packaging Corporation (“KapStone”), WestRock
Company (formerly known as Whiskey Holdco, Inc.), Whiskey Merger Sub, Inc. and Kola Merger Sub, Inc., the
Company acquired all of the outstanding shares of KapStone through a transaction in which: (i) Whiskey Merger
Sub, Inc. merged with and into WRKCo, with WRKCo surviving the merger as a wholly owned subsidiary of the
Company and (ii) Kola Merger Sub, Inc. merged with and into KapStone, with KapStone surviving the merger as a
wholly owned subsidiary of the Company (together, the “KapStone Acquisition”). As a result, among other things,
the Company became the ultimate parent of WRKCo, KapStone and their respective subsidiaries, and the
Company changed its name to “WestRock Company” and WRKCo changed its name to “WRKCo Inc.”. WRKCo
was the accounting acquirer in the transaction; therefore, the historical consolidated financial statements of
WRKCo for periods prior to the KapStone Acquisition are also considered to be the historical financial statements
3
of the Company. The Company is the successor issuer to both WRKCo and KapStone pursuant to Rule 12g-3(c)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). See “Note 3. Acquisitions and
Investment” of the Notes to Consolidated Financial Statements for more information.
Effective in the first quarter of fiscal 2019, we aligned our financial results for all periods presented to move our
merchandising displays operations from our Consumer Packaging segment to our Corrugated Packaging segment
and to allocate certain previously non-allocated costs and certain pension and other postretirement non-service
income (expense) to our reportable segments. Separately, in the first quarter of fiscal 2019, we began conducting
our recycling operations primarily as a procurement function. Since then, recycling net sales have not been
recorded and the margin from these operations has reduced cost of goods sold. Following the realignment, we
report our financial results of operations in the following three reportable segments: Corrugated Packaging, which
consists of our containerboard mills, corrugated packaging and distribution operations, as well as our
merchandising displays and recycling procurement operations; Consumer Packaging, which consists of our
consumer mills, food and beverage and partition operations; and Land and Development, which sells real estate,
primarily in the Charleston, SC region. Prior to the HH&B Sale, our Consumer Packaging segment included HH&B.
Products
Corrugated Packaging Segment
We are one of the largest integrated producers of linerboard and corrugating medium (“containerboard”),
corrugated products and specialty papers (including kraft papers and saturating kraft) in North America measured
by tons produced, one of the largest producers of high-graphics preprinted linerboard measured by net sales in
North America and one of the largest manufacturers of temporary promotional point-of-purchase displays in North
America measured by net sales. We have integrated corrugated operations in North America, Brazil and India. We
believe we are one of the largest paper recyclers in North America and our recycling operations provide
substantially all of the recycled fiber to our mills, as well as to third parties. Our Brazil operations own and operate
forestlands that provide virgin fiber to our Brazilian mill.
We operate an integrated corrugated packaging system that manufactures primarily containerboard,
corrugated sheets, corrugated packaging and preprinted linerboard for sale to consumer and industrial products
manufacturers and corrugated box manufacturers. We produce a full range of high-quality corrugated containers
designed to protect, ship, store, promote and display products made to our customers’ merchandising and
distribution specifications. We convert corrugated sheets into corrugated products ranging from one-color
protective cartons to graphically brilliant point-of-purchase packaging. Our corrugated container plants serve local
customers and regional and large national accounts. Corrugated packaging is used to provide protective
packaging for shipment and distribution of food, paper, health and beauty, and other household, consumer,
commercial and industrial products. Corrugated packaging may also be graphically enhanced for retail sale,
particularly in club store locations. We provide customers with innovative packaging solutions to promote and sell
their products. We provide structural and graphic design, engineering services and custom, proprietary and
standard automated packaging machines, offering customers turn-key installation, automation, line integration and
packaging solutions. We have a machinery solution that creates pouches that replace single-use plastics, including
bubble mailers. We also distribute corrugated packaging materials and other specialty packaging products, which
include stretch film, void fill, carton sealing tape and other specialty tapes through our network of warehouses and
distribution facilities. To make corrugated sheet stock, we feed linerboard and corrugating medium into a
corrugator that flutes the medium to specified sizes, glues the linerboard and fluted medium together, and slits and
cuts the resulting corrugated paperboard into sheets to customer specifications. Our containerboard mills and
corrugated container operations are integrated with the majority of our containerboard production used internally
by our corrugated container operations. The balance is either used in trade swaps with other manufacturers or sold
domestically and internationally.
We design, manufacture and, in certain cases, pack temporary displays for sale to consumer products
companies and retailers. These displays are used as marketing tools to support new product introductions and
specific product promotions in mass merchandising stores, supermarkets, convenience stores, home improvement
stores and other retail locations. We also design, manufacture and, in some cases, pre-assemble permanent
displays for these customers. We make temporary displays primarily from corrugated paperboard. Unlike
temporary displays, permanent displays are restocked with our customers’ product; therefore, they are constructed
primarily from metal, plastic, wood and other durable materials. We provide contract packing services, such as
multi-product promotional packing and product manipulation, such as multipacks and onpacks. We manufacture
4
and distribute point of sale material utilizing litho, screen and digital printing technologies. We manufacture
lithographic laminated packaging for sale to our customers that require packaging with high quality graphics and
strength characteristics.
Our recycling operations primarily procure recovered paper (also known as recycled fiber) from our converting
facilities and from third parties, such as factories, warehouses, commercial printers, office complexes, grocery and
retail stores, document storage facilities, paper converters and other wastepaper collectors. We handle a wide
variety of grades of recovered paper, including old corrugated containers, office paper, box clippings, newspaper
and print shop scraps. We operate recycling facilities that collect, sort, grade and bale recovered paper and, after
sorting and baling, we transfer it to our mills for processing or sell it principally to manufacturers of paperboard or
containerboard in the United States (“U.S.”), as well as manufacturers of tissue, newsprint, roofing products and
insulation, and to export markets. We operate a nationwide fiber marketing and brokerage system that serves large
regional and national accounts, as well as our recycled containerboard and paperboard mills, and sells scrap
materials from our converting businesses and mills. Many of our recycling facilities are located close to our
recycled containerboard and paperboard mills, which helps promote the availability of supply with reduced
shipping costs. In the first quarter of fiscal 2019, we began conducting our recycling operations primarily as a
procurement function, shifting its focus to the procurement of low cost, high quality fiber for our mill system. As a
result, we no longer record recycling net sales and the margin from these operations has reduced cost of goods
sold.
Sales of corrugated packaging products to external customers accounted for 64.2%, 59.0% and 60.6% of our
net sales in fiscal 2019, 2018 and 2017, respectively. See “Note 7. Segment Information” of the Notes to
Consolidated Financial Statements, as well as Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations”, for additional information.
Consumer Packaging Segment
We operate integrated virgin and recycled fiber paperboard mills and consumer packaging converting
operations, which convert items such as folding and beverage cartons, interior partitions, inserts and labels. Our
integrated system of virgin and recycled mills produces paperboard for our converting operations and third parties.
We internally consume or sell to manufacturers of folding cartons and other paperboard products our coated
natural kraft, bleached paperboard and coated recycled paperboard, and internally consume or sell to
manufacturers of solid fiber interior packaging, tubes and cores, book covers and other paperboard products our
specialty recycled paperboard. The mill owned by our Seven Hills Paperboard LLC (“Seven Hills”) joint venture in
Lynchburg, VA manufactures gypsum paperboard liner for sale to our joint venture partner.
We are one of the largest manufacturers of folding and beverage cartons in North America. We believe we are
the largest manufacturer of solid fiber partitions in North America measured by net sales. Our folding and beverage
cartons are used to package items such as food, paper, beverages, dairy products, tobacco, confectionery, health
and beauty and other household consumer, commercial and industrial products, primarily for retail sale. Our folding
and beverage cartons are also used by our customers to attract consumer attention at the point-of-sale. We
manufacture express mail packages for the overnight courier industry, provide inserts and labels, as well as rigid
packaging and other printed packaging products, such as transaction cards (e.g., credit, debit, etc.), brochures,
product literature, marketing materials (such as booklets, folders, inserts, cover sheets and slipcases) and grower
tags and plant stakes for the horticultural market. For the global healthcare market, we manufacture secondary
packages designed to enhance patient adherence for prescription drugs, as well as paperboard packaging for
over-the-counter and prescription drugs. Our customers generally use our inserts and labels to provide customer
product information either inside a secondary package (e.g., a folding carton) or affixed to the outside of a primary
package (e.g., a bottle). Folding cartons typically protect customers’ products during shipment and distribution, and
employ graphics to promote them at retail. We manufacture folding and beverage cartons from recycled and virgin
paperboard, laminated paperboard and various substrates with specialty characteristics, such as grease masking
and microwaveability. We print, coat, die-cut and glue the cartons to customer specifications and ship finished
cartons to customers for assembling, filling and sealing. We employ a broad range of offset, flexographic, gravure,
backside printing, coating and finishing technologies, as well as iridescent, holographic, textured and dimensional
effects to provide differentiated packaging products, and support our customers with new package development,
innovation and design services and package testing services. We manufacture and sell our solid fiber and
corrugated partitions and die-cut paperboard components principally to glass container manufacturers and
producers of beer, food, wine, spirits, cosmetics and pharmaceuticals, and to the automotive industry.
5
Sales of consumer packaging products to external customers accounted for 35.7%, 40.1% and 37.8% of our
net sales in fiscal 2019, 2018 and 2017, respectively. See “Note 7. Segment Information” of the Notes to
Consolidated Financial Statements, as well as Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations”, for additional information.
Land and Development Segment
We seek to maximize the value of the various real estate holdings we own that are concentrated in the
Charleston, SC region. We expect to complete the monetization of these holdings during fiscal 2020. Sales in our
Land and Development segment to external customers accounted for 0.1%, 0.9% and 1.6% of our net sales in
fiscal 2019, 2018 and 2017, respectively. See “Note 7. Segment Information” and “Note 9. Assets Held For
Sale” of the Notes to Consolidated Financial Statements, as well as Item 7. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”, for additional information.
Raw Materials
The primary raw materials used by our mill operations are recycled fiber at our recycled containerboard and
paperboard mills and virgin fiber from hardwoods and softwoods at our virgin containerboard and paperboard mills.
Certain of our virgin containerboard is manufactured with some recycled fiber content. Recycled fiber prices and
virgin fiber prices can fluctuate significantly. While virgin fiber prices have generally been more stable than
recycled fiber prices, they also fluctuate, particularly due to significant changes in weather, such as during
prolonged periods of heavy rain or drought, or during housing construction slowdowns or accelerations.
Containerboard and paperboard are the primary raw materials used by our converting operations. Our
converting operations use many different grades of containerboard and paperboard. We supply substantially all of
our converting operations' needs for containerboard and paperboard from our own mills and through the use of
trade swaps with other manufacturers. These arrangements allow us to optimize our mill system and reduce freight
costs. Because there are other suppliers that produce the necessary grades of containerboard and paperboard
used in our converting operations, we believe we would be able to source significant replacement quantities from
other suppliers in the event that we incur production disruptions for recycled or virgin containerboard and
paperboard. See Item 1A. “Risk Factors — We May Face Increased Costs For, or Inadequate Availability of,
Raw Materials, Energy and Transportation”.
Energy
Energy is one of the most significant costs of our mill operations. The cost of natural gas, coal, oil, electricity
and wood by-products (biomass) at times has fluctuated significantly. In our recycled paperboard mills, we use
primarily natural gas and electricity, supplemented with coal and fuel oil to generate steam used in the paper
making process and, at a few mills, to generate electricity used on site. In our virgin fiber mills, we use natural gas,
biomass and coal to generate steam used in the pulping and paper making processes and to generate some or all
of the electricity used on site. We primarily use electricity and natural gas to operate our converting facilities. We
generally purchase these products from suppliers at market or tariff rates. See Item 1. “Business —
Governmental Regulation — Environmental and Other Matters” for additional information. See also Item 1A.
“Risk Factors — We May Face Increased Costs For, or Inadequate Availability of, Raw Materials, Energy
and Transportation”. See also Item 7A. “Quantitative and Qualitative Disclosures About Market Risk —
“Energy” and “Derivative Instruments / Forward Contracts”.
Transportation
Inbound and outbound freight is a significant expenditure for us. Factors that influence our freight expense are
distance between our shipping and delivery locations, distance from our facilities to our customers and suppliers,
mode of transportation (rail, truck, intermodal and ocean) and freight rates, which are influenced by supply and
demand and fuel costs. We experienced continued higher freight costs in fiscal 2019. The principal markets for our
products are in North America, South America, Europe, Asia and Australia. See Item 1A. “Risk Factors — We
May Face Increased Costs For, or Inadequate Availability of, Raw Materials, Energy and Transportation”.
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Sales and Marketing
None of our top ten external customers individually accounted for more than 10% of our consolidated net sales
in fiscal 2019. We generally manufacture our products pursuant to customers’ orders. We believe that we have
good relationships with our customers. See Item 1A. “Risk Factors — We Depend on Certain Large
Customers”.
As a result of our vertical integration, our mills’ sales volumes may be directly impacted by changes in demand
for our packaging products. During fiscal 2019, approximately two-thirds of our coated natural kraft tons shipped,
approximately three-fifths of our coated recycled paperboard tons shipped and approximately one-fifth of our
bleached paperboard tons shipped were delivered to our converting operations, primarily to manufacture folding
and beverage cartons, and approximately three-fourths of our containerboard tons shipped, including trade swaps
and buy/sell transactions, were delivered to our converting operations to manufacture corrugated products. Under
the terms of our Seven Hills joint venture arrangement, our joint venture partner is required to purchase all of the
qualifying gypsum paperboard liner produced by Seven Hills. Excluding the production from Seven Hills and from
our Aurora, IL facility, which is converted into book covers and other products, approximately one-third of our
specialty recycled paperboard tons shipped in fiscal 2019 were delivered to our converting operations, primarily to
manufacture interior partitions. We have the ability to move our internal sourcing among certain of our mills to
optimize the efficiency of our operations.
As a result of our broad portfolio of differentiated and sustainable paper and packaging solutions, we serve
over 15,000 customers, including over 150 customers that buy at least $1 million from each of our segments. We
believe that our ability to leverage our full portfolio of differentiated solutions and capabilities enables us to set
ourselves apart from our competitors.
We market our products primarily through our own sales force. We also market a number of our products
through independent sales representatives, independent distributors or both. We generally pay our sales
personnel a combination of base salary, commissions and annual bonus. We pay our independent sales
representatives on a commission basis. Orders from our customers generally do not have significant lead times.
We discuss foreign net sales to unaffiliated customers and other non-U.S. operations financial and other segment
information in “Note 7. Segment Information” of the Notes to Consolidated Financial Statements.
Competition
We operate in a competitive global marketplace and compete with many large, well established and highly
competitive manufacturers and service providers. Our business is affected by a range of macroeconomic
conditions, including industry capacity changes, global competition, economic conditions in the U.S. and abroad,
as well as fluctuations in currency exchange rates.
The industries we operate in are highly competitive, and no single company dominates any of those industries.
Our containerboard and paperboard operations compete with integrated and non-integrated national and regional
companies operating primarily in North America, and to a limited extent, manufacturers outside of North America.
Our competitors include large and small, vertically integrated companies and numerous smaller non-integrated
companies. In the corrugated packaging and folding and beverage carton markets, we compete with a significant
number of national, regional and local packaging suppliers in North America and abroad. In the solid fiber interior
packaging, promotional point-of-purchase display and converted paperboard products markets, we primarily
compete with a smaller number of national, regional and local companies offering highly specialized products.
Because all of our businesses operate in highly competitive industry segments, we regularly discuss sales
opportunities for new business or for renewal of existing business with customers. Our packaging products
compete with packaging made from other materials, including plastics. The primary competitive factors we face
include price, design, product innovation, quality, service and, most recently, sustainability, with varying emphasis
on these factors depending on the product line and customer preferences. Our machinery solutions represent one
example of how we provide differentiated solutions and create value for our customers. We believe that we
compete effectively with respect to each of these factors and we obtain feedback on our performance with
customer surveys, among other means.
The industries in which we operate have undergone consolidation. Within the packaging products industry,
larger customers, with an expanded geographic presence, have tended to seek suppliers that can, because of their
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broad geographic presence, efficiently and economically supply all or a range of their packaging needs. In addition,
our customers continue to demand higher quality products meeting stricter quality control requirements. Demand
for sustainable products also impacts our industry. See Item 1. “Business — Sustainability” for additional
information.
See Item 1A. “Risk Factors — We Face Intense Competition” and “Risk Factors — We May Be Adversely
Affected by Factors That Are Beyond Our Control, Such as U.S. and Worldwide Economic and Financial
Market Conditions, and Social and Political Change”.
Governmental Regulation
Health and Safety Regulations
Our operations are subject to a broad range of foreign, federal, state and local laws and regulations relating to
workplace safety and worker health, including the Occupational Safety and Health Act of 1970 (“OSHA”) and
similar laws and regulations. OSHA, among other things, establishes asbestos standards for the workplace.
Although we do not use asbestos in manufacturing our products, asbestos containing material (“ACM”) is present
in some of our facilities. For those facilities where ACM is present and asbestos is subject to regulation, we have
established procedures for properly managing ACM, including, but not limited to, employee training and work
practices to maintain the ACM in good condition and minimize exposure. We do not believe that future compliance
with health and safety laws and regulations will have a material adverse effect on our results of operations,
financial condition or cash flows.
Environmental and Other Matters
Environmental compliance requirements are a significant factor affecting our business. We employ
manufacturing processes that result in various discharges, emissions and wastes. These processes are subject to
numerous federal, state, local and international environmental laws and regulations, as well as the requirements of
environmental permits and similar authorizations issued by various governmental authorities.
On January 31, 2013, the U.S. Environmental Protection Agency (the “EPA”) published a set of four
interrelated final rules establishing national air emissions standards for hazardous air pollutants from industrial,
commercial and institutional boilers and process heaters, commonly known as “Boiler MACT.” Boiler MACT
required compliance by January 31, 2016 or by January 31, 2017 for those mills for which we obtained a prior
compliance extension. All work required for our boilers to comply with the rule has been completed. On July 29,
2016, the U.S. Court of Appeals for the District of Columbia Circuit issued a ruling on the consolidated cases
challenging Boiler MACT. The court vacated key portions of the rule, including emission limits for certain
subcategories of solid fuel boilers, and remanded other issues to the EPA for further rulemaking. At this time, we
cannot predict with certainty how this decision will impact our existing Boiler MACT strategies or whether we will
incur additional costs to comply with any revised Boiler MACT standards.
In addition to Boiler MACT, we are subject to several other federal, state, local and international environmental
rules that may impact our business, including the National Ambient Air Quality Standards for nitrogen oxide, sulfur
dioxide, fine particulate matter and ozone for facilities in the U.S.
We are involved in various administrative proceedings relating to environmental matters that arise in the
normal course of business, and we may become involved in similar matters in the future. Although the ultimate
outcome of these proceedings cannot be predicted with certainty and we cannot at this time estimate any
reasonably possible losses based on available information, we do not believe that the currently expected outcome
of any environmental proceedings and claims that are pending or threatened against us will have a material
adverse effect on our results of operations, financial condition or cash flows.
See Item 1A. “Risk Factors — We are Subject to a Wide Variety of Laws, Regulations and Other
Requirements That are Subject to Change and May Impose Substantial Compliance Costs”.
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CERCLA and Other Remediation Costs
We face potential liability under federal, state, local and international laws as a result of releases, or threatened
releases, of hazardous substances into the environment from various sites owned and operated by third parties at
which Company-generated wastes have allegedly been deposited. Generators of hazardous substances sent to
off-site disposal locations at which environmental problems exist, as well as the owners of those sites and certain
other classes of persons, are liable for response costs for the investigation and remediation of such sites under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) and analogous
laws. While joint and several liability is authorized under CERCLA, liability is typically shared with other potentially
responsible parties (“PRPs”) and costs are commonly allocated according to relative amounts of waste deposited
and other factors.
In addition, certain of our current or former locations are being investigated or remediated under various
environmental laws, including CERCLA. Based on information known to us and assumptions, we do not believe
that the costs of these projects will have a material adverse effect on our results of operations, financial condition
or cash flows. However, the discovery of contamination or the imposition of additional obligations, including natural
resources damaged at these or other sites in the future could result in additional costs.
On January 26, 2009, Smurfit-Stone Container Corporation (“Smurfit-Stone”), which we acquired in fiscal
2011, and certain of its subsidiaries filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy
Code. Smurfit-Stone’s Canadian subsidiaries also filed to reorganize in Canada. We believe that matters relating to
previously identified third party PRP sites and certain facilities formerly owned or operated by Smurfit-Stone have
been satisfied by claims in the Smurfit-Stone bankruptcy proceedings. However, we may face additional liability for
cleanup activity at sites that are not subject to the bankruptcy discharge, but are not currently identified. The final
bankruptcy distributions were made in fiscal 2018.
We believe that we can assert claims for indemnification pursuant to existing rights we have under purchase
and other agreements in connection with certain remediation sites. In addition, we believe that we have insurance
coverage, subject to applicable deductibles/retentions, policy limits and other conditions, for certain environmental
matters. However, there can be no assurance that we will be successful with respect to any claim regarding these
insurance or indemnification rights or that, if we are successful, any amounts paid pursuant to the insurance or
indemnification rights will be sufficient to cover all our costs and expenses. We also cannot predict with certainty
whether we will be required to perform remediation projects at other locations, and it is possible that our
remediation requirements and costs could increase materially in the future and exceed current reserves. In
addition, we cannot currently assess with certainty the impact that future changes in cleanup standards or federal,
state or other environmental laws, regulations or enforcement practices will have on our results of operations,
financial condition or cash flows.
We estimate that we will invest approximately $15 million for capital expenditures during fiscal 2020 in
connection with matters relating to environmental compliance. It is possible that our capital expenditure
assumptions and the project completion dates may change, and our projections are subject to change due to items
such as the finalization of ongoing engineering projects and the outcomes of pending legal challenges to the Boiler
MACT rules.
Climate Change
Certain jurisdictions in which we have manufacturing facilities or other investments have taken actions to
address climate change. The EPA has issued the Clean Air Act permitting regulations applicable to certain facilities
that emit greenhouse gases (“GHG”). The EPA also has promulgated a rule requiring certain industrial facilities
that emit 25,000 metric tons or more of carbon dioxide equivalent per year to file an annual report of their
emissions. While we have facilities subject to existing GHG permitting and reporting requirements, the impact of
these requirements has not been material to date.
Additionally, the EPA has been working on rulemakings aimed at cutting carbon emissions from power plants.
On June 20, 2019, the EPA issued the final Affordable Clean Energy (“ACE”) rule, which establishes emission
guidelines for states to use in developing plans to address greenhouse gas emissions from existing coal-fired
power plants. The ACE rule replaced a final rule issued by the EPA in 2015 establishing GHG emission guidelines
for existing electric utility generating units, which was stayed by the U.S. Supreme Court and has never gone into
effect. Although the ACE rule does not apply directly to the power generation facilities at our mills, it has the
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potential to increase the cost of purchased electricity for our manufacturing operations and change the treatment of
certain types of biomass that are currently considered carbon neutral. Due to uncertainties regarding the
implementation of the ACE rule, its potential impacts on us cannot be quantified with certainty at this time.
In addition to national efforts to regulate climate change, some U.S. states in which we have manufacturing
operations are taking measures to reduce GHG emissions, such as requiring GHG emissions reporting or
developing regional cap-and-trade programs. California has enacted a cap-and-trade program that took effect in
2012, and includes enforceable compliance obligations that began in 2013. In 2017, California extended the cap-
and-trade program to 2030. We do not have any manufacturing facilities that are subject to the cap-and-trade
requirements in California; however, we are continuing to monitor the implementation of this program as well as
proposed mandatory GHG reduction efforts in other states. The Washington Department of Ecology issued a final
rule, known as the Clean Air Rule, in 2016, which applies to facilities that have average annual carbon dioxide
equivalent emissions equal to or exceeding 100,000 metric tons/year. Energy intensive and trade exposed
facilities, including our Tacoma, WA and Longview, WA mills, and transportation fuel importers are subject to
regulation under this program. Various groups filed lawsuits against the Washington Department of Ecology
challenging the Clean Air Rule and, in 2018, the Thurston County Superior Court invalidated the Clean Air Rule.
The Washington Department of Ecology subsequently filed an appeal with the State Supreme Court. The case was
argued before the Supreme Court on March 19, 2019, and an opinion is expected before the end of 2019.
Implementation of the Clean Air Rule has been stayed while the appeal is pending. In June 2019, the State of New
York passed the Climate Leadership and Community Protection Act (“CLCPA”). This legislation, which becomes
effective in January 2020, commits the state to reaching net zero GHG emissions, with interim goals of a 40%
reduction in absolute terms from 1990 levels by 2030 and an 85% reduction by 2050. Our Solvay, NY mill could be
affected by the implementation of the CLCPA, although we cannot currently quantify any impacts due to
uncertainties regarding implementation of the law. The Virginia Department of Environmental Quality has issued
regulations that would link the Commonwealth to the Regional Greenhouse Gas Initiative (“RGGI”), which is a
nine-state, market-based carbon cap-and-trade program. Although industrial facilities like our paper mills and
converting facilities in Virginia would be exempt from the RGGI regulations, electric generating units and utilities
subject to the RGGI carbon reduction requirements may incur increased costs that could be passed on to
ratepayers like our industrial facilities in Virginia. The State Air Pollution Control Board approved the final RGGI
carbon trading regulations in April 2019; however, legislative amendments made to Virginia’s 2019 budget
currently block the use of state funds to join RGGI or any climate change compacts, and to prevent using any cap-
and-trade revenue without General Assembly approval. In September 2019, Governor Ralph Northam issued
Executive Order 43 (“EO 43”), setting goals for Virginia to generate 30 percent of its electricity from carbon-free
sources by 2030 and 100 percent by 2050. EO 43 directs various state agencies, including the Department of
Environmental Quality, to develop a plan of action to meet these energy goals and address related issues such as
energy storage, energy efficiency and environmental justice.
The agreement signed in April 2016 among the U.S. and over 170 other countries, which arose out of
negotiations at the United Nation’s Conference of Parties (COP21) climate summit in December 2015 (the “Paris
Agreement”), established a framework for reducing global GHG emissions. By signing the Paris Agreement, the
U.S. made a non-binding commitment to reduce economy-wide GHG emissions by 26% to 28% below 2005 levels
by 2025. Other countries in which we conduct business, including China, European Union member states and
India, have set GHG reduction targets. The Paris Agreement became effective in November 2016. Although a
party to the agreement may not provide the required one-year notice of withdrawal until three years after the
effective date, in 2017, President Trump announced that the U.S. intended to withdraw from the Paris Agreement.
At this time, it is not possible to determine how the Paris Agreement, or any potential U.S. commitments in lieu of
those under the agreement, may impact U.S. industrial facilities, including our domestic operations.
Several of our international facilities are located in countries that have already adopted GHG emissions trading
schemes. For example, Quebec has become a member of the Western Climate Initiative, which is a collaboration
among California and certain Canadian provinces that have joined together to create a cap-and-trade program to
reduce GHG emissions. In 2009, Quebec adopted a target of reducing GHG emissions by 20% below 1990 levels
by 2020 and 37.5% from 1990 levels by 2030. In 2011, Quebec issued a final regulation establishing a regional
cap-and-trade program that required reductions in GHG emissions from covered emitters as of January 1, 2013.
Our mill in Quebec is subject to these cap-and-trade requirements, although the direct impact of this regulation has
not been material to date. Compliance with this program and other similar programs may require future
expenditures to meet required GHG emission reduction requirements in future years.
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Regulation related to climate change continues to develop in the areas of the world where we conduct
business. We have systems in place for tracking the GHG emissions from our energy-intensive facilities, and we
carefully monitor developments in climate related laws, regulations and policies to assess the potential impact of
such developments on our results of operations, financial condition, cash flows and disclosure obligations.
Sustainability
Sustainability is an integral part of our business strategy and one of our four stated key value drivers for our
customers. Paper-based packaging has several attributes that, we believe, makes it well-suited to helping our
customers provide sustainable solutions for their customers. For example, it is lightweight, durable, versatile, and
in many instances, recyclable and made with renewable materials. Given the size and geographic breadth of our
manufacturing operations and our history of developing innovative products and solutions, we believe that we are
uniquely positioned to help our customers improve their sustainability. Also, we are helping to drive the
development of the circular economy by recovering used paper-based packaging through our extensive network of
recycling facilities and turning the recovered fiber into new packaging or selling it to others to use to make new
products. Examples of our commitment to sustainability include having one of the industry’s largest certified virgin
fiber procurement systems and heading an industry-leading foodservice recycling initiative. We have been
recognized for our sustainability efforts through, among other things, industry award programs and inclusion in the
FTSE 4 Good index.
Patents and Other Intellectual Property
We hold a substantial number of foreign and domestic trademarks, trademark applications, trade names,
patents, patent applications and licenses relating to our business, our products and our production processes. Our
patent portfolio consists primarily of utility and design patents relating to our products and manufacturing
operations. It also includes exclusive rights to substantial proprietary packaging system technology in the U.S. or
other licenses obtained from a third party. Our brand name and logo, and certain of our products and services, are
protected by domestic and foreign trademark rights. Our patents, trademarks and other intellectual property rights,
particularly those relating to our converting operations, are important to our operations as a whole. Our intellectual
property has various expiration dates.
Employees
At September 30, 2019, we employed approximately 51,100 people, of which approximately 78% were located
in the U.S. and Canada and 22% were located in Europe, South America, Mexico and Asia/Pacific. Of the
approximately 51,100 employees, approximately 71% were hourly and 29% were salaried. Approximately 46% of
our hourly employees in the U.S. and Canada are covered by collective bargaining agreements (“CBA” or
“CBAs”), which typically have four to six year terms. Approximately 17% of those employees covered under CBAs
are operating under agreements that expire within one year and approximately 4% of those employees are working
under expired contracts.
While we have experienced isolated work stoppages in the past, we have been able to resolve them, and we
believe that working relationships with our employees are generally good. While the terms of our CBAs vary, we
believe the material terms of the agreements are customary for the industry, the type of facility, the classification of
the employees and the geographic location covered.
In October 2014, we entered into a master agreement with the United Steelworkers Union (“USW”) that applied
to substantially all of our legacy RockTenn facilities represented by the USW at that time. The agreement has a six
year term and covers a number of specific items, including wages, medical coverage and certain other benefit
programs, substance abuse testing and successorship. Individual facilities will continue to have local agreements
for subjects not covered by the master agreement and those agreements will continue to have staggered
terms. Wage increases specified in the master agreement have been negotiated and ratified. The master
agreement permits us to apply its terms to USW employees who work at facilities we acquire during the term of the
agreement, and, it now covers many former MeadWestvaco, KapStone and other facilities acquired. WestRock
and the USW are currently re-negotiating a successor agreement to the original master agreement. The master
agreement covers approximately 63 of our U.S. facilities and approximately 8,900 of our employees.
See Item 1A. “Risk Factors — We May Be Adversely Impacted By Work Stoppages and Other Labor
Relations Matters”.
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International Operations
Our operations outside the U.S. are conducted through subsidiaries located in Canada, Mexico, South
America, Europe, Asia and Australia. Sales attributable to non-U.S. operations were 18.2%, 19.9% and 17.6% of
our net sales in fiscal 2019, 2018 and 2017, respectively, some of which were transacted in U.S. dollars. See “Note
7. Segment Information” of the Notes to Consolidated Financial Statements for additional information. See also
Item 1A. “Risk Factors — We are Exposed to Risks Related to International Sales and Operations”.
Available Information
Our Internet address is www.westrock.com. Our Internet address is included herein as an inactive textual
reference only. The information contained on our website is not incorporated by reference herein and should not be
considered part of this report. We file annual, quarterly and current reports, proxy statements and other information
with the Securities and Exchange Commission (“SEC”) and we make available free of charge most of our SEC
filings through our Internet website as soon as reasonably practicable after filing with the SEC. You may access
these SEC filings via the hyperlink that we provide on our website to a third-party SEC filings website. We also
make available on our website our board committee charters, as well as the corporate governance guidelines
adopted by our board of directors, our Code of Conduct for employees, our Code of Conduct and Ethics for the
Board of Directors and our Code of Ethical Conduct for Chief Executive Officer (“CEO”) and Senior Financial
Officers. Any amendments to, or waiver from, any provision of these codes that are required to be disclosed will be
posted on our website. We will also provide copies of these documents, without charge, at the written request of
any stockholder of record. Requests for copies should be mailed to: WestRock Company, 1000 Abernathy Road
NE, Atlanta, Georgia 30328, Attention: Corporate Secretary.
Forward-Looking Information
This report contains statements that relate to future, rather than past, events. These statements are forward-
looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking
statements made in this report often address our expected future business and financial performance and financial
conditions, and often contain words such as “may”, “will”, “could”, “would”, “anticipate”, “intend”, “estimate”,
“project”, “plan”, “believe”, “expect”, “target” and “potential”, or refer to future time periods. Forward-looking
statements are based on currently available information and our current expectations, beliefs, plans or forecasts,
and include statements made in this report regarding, among other things:
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our belief that we are one of the largest paper recyclers in North America;
our belief that we are the largest manufacturer of solid fiber partitions in North America measured by
net sales;
our expectation that we will complete the monetization of our Land and Development holdings during
fiscal 2020;
our belief that we would be able to source significant replacement quantities from other suppliers in the
event we incur production disruptions for recycled or virgin containerboard and paperboard;
our belief that we have good relationships with our customers;
our belief that our ability to leverage our full portfolio of differentiated solutions and capabilities enables
us to set ourselves apart from our competitors;
our belief that we compete effectively on price, design, product innovation, quality and service;
our belief that future compliance with health and safety laws and regulations will not have a material
adverse effect on our results of operations, financial condition or cash flows;
our belief that the currently expected outcome of any environmental proceedings and claims that are
pending or threatened against us will not have a material adverse effect on our results of operations,
financial condition or cash flows;
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our belief that the costs associated with investigations or remediations under various environmental
laws and regulations, including CERCLA, will not have a material adverse effect on our results of
operations, financial condition or cash flows;
our belief that matters relating to previously identified third party PRP sites and certain facilities
formerly owned or operated by Smurfit-Stone have been satisfied by claims in the Smurfit-Stone
bankruptcy proceedings;
our belief that we can assert claims for indemnification pursuant to existing rights we have under
purchase and other agreements in connection with certain remediation sites and have insurance
coverage, subject to applicable deductibles/retentions, policy limits and other conditions, for certain
environmental matters;
our expectation that compliance with the Western Climate Initiative and other similar programs may
require future expenditures to meet required GHG emission reduction requirements in future years;
our belief that we are uniquely positioned to help our customers improve their sustainability;
that our businesses are likely to continue experiencing cycles relating to industry capacity and general
economic conditions;
our belief that working relationships with our employees are generally good;
our expectation that the benefits from potential, as well as completed, acquisitions and joint ventures
will include synergies, cost savings, growth opportunities or access to new markets (or a combination
thereof), and in the case of divestitures, the realization of proceeds from the sale of businesses and
assets to purchasers that place higher strategic value on these businesses and assets than we do;
our belief that we have made significant progress integrating KapStone’s operations into our
management and operating structures;
our expectation that the KapStone Acquisition will generate run-rate synergies and performance
improvements of more than $200 million by the end of fiscal 2021;
our expectation that we will continue to incur significant capital, operating and other expenditures
complying with applicable environmental, health and safety laws and regulations;
that we may be required to incur additional indebtedness or issue equity securities in order to satisfy
our payment or investment obligations in respect of Grupo Gondi;
that we may form additional joint ventures;
our belief that certain multiemployer pension plans (“MEPP” or “MEPPs”) in which we participate or
have participated, including Pace Industry Union-Management Pension Fund (“PIUMPF”), have
material unfunded vested benefits;
that we expect to challenge the PIUMPF accumulated funding deficiency, and that we expect to begin
making monthly payments for the PIUMPF withdrawal liabilities in fiscal 2020;
that we are may withdraw from other MEPPs in the future;
our belief that our existing production capacity is adequate to serve existing demand for our products
and that our plants and equipment are in good condition;
our belief that the resolution of lawsuits and claims will not have a material adverse effect on our
consolidated financial condition, results of operations or cash flows;
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that we expect in the future to continue to evaluate potential acquisitions similar to those completed in
the past, although the size of individual acquisitions may vary;
our belief that our strong balance sheet and cash flow provide us the flexibility to continue to invest to
sustain and improve our operating performance;
our expectation that we will generate net sales of between $18.0 and $18.5 billion in fiscal 2020, and
the factors thereof;
our expectation that our earnings in fiscal 2020 to be impacted by pricing declines, as well as cost
inflation related to wages, benefits and other non-commodity categories, and that we expect to
experience commodity cost deflation, particularly related to recycled fiber;
our expectation that slightly more of our earnings will be generated in the second half of the fiscal year
than in the first half of the fiscal year due to seasonality, the timing of scheduled mill maintenance
outages and our strategic capital projects;
our expectation that we will reconfigure our North Charleston, SC mill beginning in the second quarter
of fiscal 2020, and that reconfiguration is expected to reduce our linerboard capacity by approximately
288,000 tons and our annual costs by approximately $40 million, including a workforce reduction over
a five-month period;
that the new paper machine at our Florence, SC mill is scheduled to start up during the spring of 2020,
and that we expect to incur maintenance downtime during the first quarter of fiscal 2020 in connection
with this project;
that the upgrade of our mill located in Tres Barras, Brazil is expected to be completed in the first half of
calendar 2021;
our general expectation that the integration of a closed facility’s assets and production with other
facilities will enable the receiving facilities to better leverage their fixed costs while eliminating fixed
costs from the closed facility;
our belief that it is likely that we will engage in future restructuring activities;
• with respect to the impact of Hurricane Michael on our Panama City, FL mill, (a) our expectation that
all remaining repair work will be completed during fiscal 2020 and 2021, (b) our anticipation that the
total of our property damage and business interruption claim will exceed $200 million and (c) our
expectation that we will recover the majority of the additional amount of direct costs and lost
production and sales, excluding our $15 million deductible, in future periods through insurance
reimbursements;
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our expectation that funding for our domestic operations in the foreseeable future to come from
sources of liquidity within our domestic operations, including cash and cash equivalents, and available
borrowings under our credit facilities, and that our foreign cash and cash equivalents are not expected
to be a key source of liquidity to our domestic operations;
our expectation that capital expenditures in fiscal 2020 will be approximately $1.1 billion, that with the
completion of certain of our strategic capital projects in fiscal 2019 and 2020 we expect to transition to
our long-range capital expenditure run rate of approximately $900 million to $1.0 billion a year in fiscal
2021 and that we generally expect our base capital expenditures to be roughly half invested in
maintenance and half invested in high return generating projects;
our estimation that we will invest approximately $15 million for capital expenditures during fiscal 2020
in connection with matters relating to environmental compliance;
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our expectation that we will utilize the remaining U.S. federal net operating losses primarily over the
next two years and that foreign and state net operating losses and credits will be used over a longer
period of time;
our expectation that, including the estimated impact of book and tax differences, subject to changes in
tax laws, our cash tax rate will move closer to our income tax rate in fiscal 2020, 2021 and 2022;
our expectation that we will contribute approximately $27 million to our U.S. and non-U.S. pension
plans in fiscal 2020;
our estimation that minimum pension contributions to our U.S. and non-U.S. pension plans will be in
the range of approximately $24 million to $28 million annually in fiscal 2021 through 2024;
our expectation that we will continue to make contributions in the coming years to our pension plans in
order to ensure that our funding levels remain adequate in light of projected liabilities and to meet the
requirements of the Pension Protection Act of 2006 (“Pension Act”) and other regulations;
our anticipation that we will be able to fund our capital expenditures, interest payments, dividends and
stock repurchases, pension payments, working capital needs, note repurchases, restructuring
activities, repayments of current portion of long-term debt and other corporate actions for the
foreseeable future from cash generated from operations, borrowings under our credit facilities,
proceeds from our A/R Sales Agreement (as hereinafter defined), proceeds from the issuance of debt
or equity securities or other additional long-term debt financing, including new or amended facilities;
that we may seek to refinance existing indebtedness, to extend maturities, reduce borrowing costs or
otherwise improve the terms and composition of our indebtedness;
our beliefs with respect to material changes in future assumptions and estimates related to allowances
and impairment;
our belief that our estimates for restructuring costs and other costs are reasonable, considering our
knowledge of the industries we operate in, previous experience in exiting activities and valuations we
may obtain from independent third parties;
our belief that our assumptions are appropriate with respect to health insurance costs, workers’
compensation cost and pension and other postretirement benefit obligations;
our expectation of the impact of implementation of various accounting standards, including that certain
of these standards will not have a material effect on our consolidated financial statements;
our belief that the Grupo Gondi (as defined herein) joint venture is helping to grow our presence in the
attractive Mexican market;
our belief that our restructuring actions have allowed us to more effectively manage our business;
our expectation that by investing in a variety of asset classes and utilizing multiple investment
management firms, we can create a portfolio for our pension plans that yields adequate returns with
reduced volatility;
our belief that PIUMPF’s demand related to our withdrawal would include both a payment for
withdrawal liability and for our proportionate share of PIUMPF’s accumulated funding deficiency;
our expectation that MWV TN (as defined herein) will only repay the liability at maturity from the
Timber Note (as defined herein) proceeds;
our belief that the liability for environmental matters was adequately reserved at September 30, 2019;
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our belief that we have substantial insurance coverage, subject to applicable deductibles and policy
limits, with respect to asbestos claims;
our belief that we have valid defenses to asbestos-related personal injury claims and intend to
continue to defend them vigorously, and that should the volume of asbestos-related personal injury
litigation grow substantially, it is possible that we could incur significant costs resolving these cases;
our expectation that the resolution of pending asbestos litigation and proceedings will not have a
material adverse effect on results of operations, financial condition or cash flows and that in any given
period or periods, it is possible that asbestos-related proceedings or matters could have a material
adverse effect on our results of operations, financial condition or cash flows;
our estimation that the exposure with respect to certain guarantees we have made could be
approximately $50 million;
our belief that our exposure related to guarantees will not have a material impact on our results of
operations, financial condition or cash flows;
our expectation that we will not issue additional SARs;
that we may enter into various hedging transactions, including commodity hedge contracts, interest
rate swap agreements and foreign-exchange hedge contracts;
our belief that in the event of a distribution in the form of dividends or dispositions of our foreign
subsidiaries, we may be subject to incremental U.S. income taxes, subject to an adjustment for foreign
tax credits, and withholding taxes or income taxes payable to the foreign jurisdictions;
that it is reasonably possible that our unrecognized tax benefits will decrease by up to $8.7 million in
the next twelve months due to expiration of various statues of limitations and settlement of issues;
our belief that our tax positions are appropriate;
the expected impact of market risks, such as interest rate risk, pension plan risk, foreign currency risk,
commodity price risks, energy price risk, rates of return, the risk of investments in derivative
instruments, and the risk of counterparty nonperformance, and expected factors affecting those risks,
including our exposure to foreign currency rate fluctuations;
that the net proceeds from issuances of notes under our commercial paper program are expected to
continue to be used for general corporate purposes; and
our belief that the decision of the Supreme Court of Brazil concluding that certain state value added
tax should not be included in the calculation of federal gross receipts taxes reduced our gross receipts
tax in Brazil prospectively and retrospectively, and will allow us to recover tax amounts collected by the
government.
Forward-looking statements are based on currently available information and our current assumptions,
expectations and projections about future events. You should not rely on our forward-looking statements. Our
forward-looking statements are not guarantees of future performance and are subject to future events, risks and
uncertainties — many of which are beyond our control, dependent on actions of third parties or currently unknown
to us — as well as potentially inaccurate assumptions that could cause actual results to differ materially from our
expectations and projections. Particular uncertainties that could cause our actual results to be materially different
than those expressed in our forward-looking statements include: our ability to achieve benefits from acquisitions
(including the KapStone Acquisition) and the timing thereof, including synergies, performance improvements and
successful implementation of capital projects (including our strategic capital projects); risks and uncertainties
associated with, the KapStone Acquisition; the level of demand for our products; our ability to successfully identify
and make performance improvements; anticipated returns on our capital investments; uncertainties related to
planned and unplanned mill outages or production disruptions; investment performance, discount rates, return on
pension plan assets and expected compensation levels; fluctuations in energy, raw materials, shipping and capital
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equipment costs; fluctuations in selling prices and volumes; intense competition; the impact of operational
restructuring activities; potential liability for outstanding guarantees and indemnities and the potential impact of
such liabilities; changes in law, economic and financial conditions, including interest and exchange rate volatility,
commodity and equity prices; our ability to maintain our current credit rating and the impact on our funding costs
and competitive position if we do not do so; the amount and timing of our cash flows and earnings and other
conditions, which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at
planned levels; our capital allocation plans, as such plans may change including with respect to the timing and size
of share repurchases, acquisitions, joint ventures, dispositions and other strategic actions; the impact of
announced price increases or decreases and the impact of the gain and loss of customers; compliance with
governmental laws and regulations, including those related to the environment; the scope, and timing and outcome
of any litigation, claims, or other proceedings or dispute resolutions and the impact of any such litigation (including
the Brazil Tax Liability), claims or other proceedings or dispute resolutions on our results of operations, financial
condition or cash flows; income tax rates, future deferred tax expense and future cash tax payments; future debt
repayment; the occurrence of severe weather or a natural disasters, such as hurricanes or other unanticipated
problems, such as labor difficulties, equipment failure or unscheduled maintenance and repair, which could result
in operational disruptions of varied duration; and other factors that are discussed in Item 1A. “Risk Factors”.
Forward-looking statements speak only as of the date they are made, and we do not undertake to update
these statements other than as required by law. You are advised, however, to review any further disclosures we
make on related subjects in our periodic filings with the SEC.
Item 1A. RISK FACTORS
We are subject to certain risks and events that, if one or more occur, could adversely affect our results of
operations, cash flows and financial condition, and the trading price of our common stock, par value $0.01 per
share (“Common Stock”). In evaluating us, our business and a potential investment in our securities, you should
consider the following risk factors and the other information presented in this report, as well as the other reports
and registration statements we file from time to time with the SEC. The risks addressed below are not the only
ones we face. Additional risks not currently known to us or that we currently believe to be immaterial could also
adversely impact our business.
We May Experience Pricing Variability
Industry Risks
Our businesses have experienced, and are likely to continue experiencing, cycles relating to industry capacity
and general economic conditions. The length and magnitude of these cycles have varied over time and by product.
Prices for our products are driven by many factors, including general economic conditions, demand for our
products and competitive conditions in the industries within which we compete, and we have little influence over
the timing and extent of price changes, which may be unpredictable and volatile. If supply exceeds demand, prices
for our products could decline, and our results of operations, cash flows and financial condition, and the trading
price of our Common Stock could be adversely affected. For example, we believe that the trading price of our
Common Stock was adversely affected in fiscal 2018 and fiscal 2019 due, in part, to concerns about
announcements by certain of our competitors of planned additional capacity in the North American containerboard
market, as well as the subsequent implementation of certain of those plans.
Certain published indices (including those published by Pulp and Paper Week (“PPW”)) contribute to the
setting of selling prices for some of our products. PPW is a limited survey that may not accurately reflect changes
in market conditions for our products. Changes in how PPW is maintained, or other indices are established or
maintained, could adversely impact the selling prices for these products.
Our Earnings Are Highly Dependent on Volumes
Because our operations generally have high fixed operating cost components, our earnings are highly
dependent on volumes, which tend to fluctuate. These fluctuations make it difficult to predict our financial results
with any degree of certainty. Any failure to maintain volumes may adversely affect our results of operations, cash
flows and financial condition, and the trading price of our Common Stock.
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We May Face Increased Costs For, or Inadequate Availability of, Raw Materials, Energy and Transportation
We rely heavily on the use of certain raw materials, energy sources and third-party companies to transport our
goods.
The costs of recycled fiber and virgin fiber, the principal externally sourced raw materials for our mills, are
subject to pricing variability due to market and industry conditions. Demand for recycled fiber has fluctuated and
may increase due to, among other factors, the addition of new recycled paper mill capacity, increasing demand for
products packaged in packaging produced from paper manufactured from 100% recycled fiber and the shift by
manufacturers of virgin paperboard, tissue, newsprint and corrugated packaging to the production of products with
some recycled fiber content. In 2018, China implemented a ban on the importation of some categories of
recyclable materials (including mixed paper) and set strict contamination levels for other recovered paper imports.
The implementation of these policies resulted in lower demand for recycled fiber in the U.S. and lower associated
costs for us in fiscal 2018 and fiscal 2019. If China ends or changes these policies, demand for recycled fiber may
increase our costs and adversely affect our profitability. The market price of virgin fiber varies based on availability
and source of virgin fiber, and the availability of virgin fiber may be impacted by, among other factors, weather
conditions. In fiscal 2019, the profitability of our U.S. operations was adversely impacted by wet weather
conditions, particularly in the southern portion of the U.S., which adversely impacted the availability of virgin fiber at
some of our mills. In addition, costs for key chemicals used in our manufacturing operations fluctuate, which
impacts our manufacturing costs. Certain published indices contribute to price setting for some of our raw materials
and future changes in how these indices are established or maintained could adversely impact the pricing of these
raw materials.
The cost of natural gas, which we use in many of our manufacturing operations, including many of our mills,
and other energy costs (including energy generated by burning natural gas, fuel oil, biomass and coal) has at times
fluctuated significantly. High energy costs could increase our operating costs and make our products less
competitive compared to similar or alternative products offered by competitors.
We distribute our products primarily by truck and rail, although we also distribute some of our products by
cargo ship. The reduced availability of trucks, rail cars or cargo ships could adversely impact our ability to distribute
our products in a timely manner. High transportation costs could make our products less competitive compared to
similar or alternative products offered by competitors.
Because our businesses operate in highly competitive industry segments, we may not be able to recoup past
or future increases in the cost of raw materials, energy or transportation through price increases for our products.
The failure to obtain raw materials, energy or transportation services at reasonable market prices (or the failure to
pass on price increases to our customers) or a reduction in the availability of raw materials, energy or
transportation services due to increased demand, significant changes in climate or weather conditions, or other
factors could adversely affect our results of operations, cash flows and financial condition, and the trading price of
our Common Stock.
We Face Intense Competition
We compete in industries that are highly competitive. Our competitors include large and small, vertically
integrated companies and numerous smaller non-integrated companies. We generally compete with companies
operating in North America, although we have operations spanning North America, South America, Europe, Asia
and Australia. Factors affecting our ability to compete include the entry of new competitors into the markets we
serve, increased competition from overseas producers, our competitors’ pricing strategies, the introduction by our
competitors of new technologies and equipment, our ability to anticipate and respond to changing customer
preferences and our ability to maintain the cost-efficiency of our facilities. In addition, changes within these
industries, including the consolidation of our competitors and our customers, may impact competitive dynamics.
For example, in 2018, International Paper Company completed the combination of its North American consumer
packaging business with a subsidiary of Graphic Packaging Holding Company, which competes with our
Consumer Packaging segment. If our competitors are more successful than we are with respect to any key
competitive factor, our results of operations, cash flows and financial condition, and the trading price of our
Common Stock, could be adversely affected.
Our products also compete, to some extent, with various other packaging materials, including products made
of paper, plastics, wood and various types of metal. Customer shifts away from containerboard and paperboard
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packaging to packaging made from other materials could adversely affect our results of operations, cash flows and
financial condition, and the trading price of our Common Stock.
Operating Risks
We May Be Unsuccessful in Making and Integrating Mergers, Acquisitions and Investments, and
Completing Divestitures
We have completed a number of mergers, acquisitions, investments and divestitures in recent years,
including the Combination, our investment in Gondi, S.A. de C.V. (“Grupo Gondi”), the Separation, the HH&B
Sale, the MPS Acquisition and the KapStone Acquisition, and we may acquire, invest in or sell, or enter into joint
ventures with additional companies. We may not be able to identify suitable targets or purchasers or successfully
complete suitable transactions in the future, and completed transactions may not be successful. These
transactions create risks, including, but not limited to, risks associated with:
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disrupting our ongoing business, including distracting management from our existing businesses;
integrating acquired businesses and personnel into our business, including integrating information
technology systems and operations across different cultures and languages, and addressing the
economic, political and regulatory risks associated with specific countries;
working with partners or other ownership structures with shared decision-making authority;
obtaining and verifying relevant information regarding a business prior to the consummation of the
transaction, including the identification and assessment of liabilities, claims or other circumstances that
could result in litigation or regulatory risk exposure;
obtaining required regulatory approvals and/or financing on favorable terms;
retaining key employees, contractual relationships or customers;
the potential impairment of assets and goodwill;
the additional operating losses and expenses of businesses we acquire or in which we invest;
implementing controls, procedures and policies at companies we acquire; and
the dilution of interests of holders of our Common Stock through the issuance of equity securities.
Mergers, acquisitions and investments may not be successful and may adversely affect our results of
operations, cash flows and financial condition, and the trading price of our Common Stock. Among the benefits we
expect from potential, as well as completed, acquisitions and joint ventures are synergies, cost savings, growth
opportunities or access to new markets (or a combination thereof), and in the case of divestitures, the realization of
proceeds from the sale of businesses and assets to purchasers that place higher strategic value on these
businesses and assets than we do. For acquisitions, our success in realizing these benefits and the timing of
realizing them depend on the successful integration of the acquired businesses and operations with our business
and operations. Even if we integrate these businesses and operations successfully, we may not realize the full
benefits we expected within the anticipated timeframe, or at all, and the benefits may be offset by unanticipated
costs or delays.
We expect the KapStone Acquisition to generate run-rate synergies and performance improvements of more
than $200 million by the end of fiscal 2021. The success of the KapStone Acquisition will depend on, among other
things, our ability to realize anticipated growth opportunities, cost savings and other synergies. Our success in
realizing these benefits, and the timing of realizing these benefits, will depend on us successfully integrating
KapStone with our Corrugated Packaging business, which may be more difficult, complex, costly and time
consuming than we expect. The integration process and other disruptions resulting from the KapStone Acquisition
may disrupt ongoing businesses or cause inconsistencies in standards, controls, procedures and policies that
adversely affect our relationships with employees, suppliers, customers and others. If we are not able to
successfully integrate KapStone within the anticipated time frame, or at all, the expected cost savings and
synergies and other benefits of the KapStone Acquisition may not be realized fully, or at all, or may take longer or
cost us more to realize than expected, the combined businesses may not perform as expected, management’s
time and energy may be diverted, and our results of operations, cash flows and financial condition, and the trading
price of our Common Stock, could be adversely affected.
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Our Acquisition of KapStone Subjects Us to Various Risks and Uncertainties
As a result of the KapStone Acquisition, we are subject to various risks and uncertainties, including the
following:
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we may fail to realize anticipated synergies, cost savings, operating efficiencies and other benefits;
our incurrence of substantial indebtedness in connection with financing the KapStone Acquisition may
have an adverse effect on our liquidity, limit our flexibility in responding to other business opportunities and
increase our vulnerability to adverse economic and industry conditions;
we may not be able to integrate KapStone without encountering difficulties and diverting management’s
focus and resources from ordinary business activities and opportunities;
we may face challenges retaining KapStone’s customers and suppliers; and
we may encounter unforeseen internal control, regulatory or compliance issues.
Any one or more of these risks could adversely affect our results of operations, cash flows and financial
condition, and the trading price of our Common Stock.
We May Incur Business Disruptions
The operations at our manufacturing facilities may be interrupted or impaired by various operating risks,
including, but not limited to, risks associated with:
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catastrophic events, such as fires, floods, earthquakes, explosions, natural disasters, severe weather,
including hurricanes, tornados and droughts, or other similar occurrences;
interruptions in the delivery of raw materials or other manufacturing inputs;
adverse government regulations;
equipment breakdowns or failures;
prolonged power failures;
unscheduled maintenance outages;
information system disruptions or failures due to any number of causes, including cyber-attacks;
violations of our permit requirements or revocation of permits;
releases of pollutants and hazardous substances to air, soil, surface water or ground water;
disruptions in transportation infrastructure, including roads, bridges, railroad tracks and tunnels;
shortages of equipment or spare parts; and
labor disputes and shortages.
For example, in 2018, operations at our Florence, South Carolina and Panama City, FL mills were interrupted
by hurricanes, resulting in lost mill production and the incurrence of damages, supply chain disruptions and
increased input costs (see “Note 7. Segment Information” of the Notes to Consolidated Financial Statements for
additional information) and, in 2019, operations at three of our mills located in the southeastern U.S. were
temporarily idled in advance of the landfall of a hurricane.
Business disruptions may impair our production capabilities and adversely affect our results of operations,
cash flows and financial condition, and the trading price of our Common Stock.
We May Fail to Anticipate Trends That Would Enable Us to Offer Products That Respond to Changing
Customer Preferences
Our success depends, in part, on our ability to offer differentiated solutions, and we must continually develop
and introduce new products and services to keep pace with technological and regulatory developments and
changing customer preferences. The services and products that we offer customers may not meet their needs as
their business models evolve. Also, our customers may decide to decrease their use of our products, use
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alternative materials for their product packaging or forego the packaging of certain products entirely. Regulatory
developments can also significantly alter the market for our products. For example, a move to electronic
distribution of disclaimers and other paperless regimes could adversely impact our healthcare inserts and labels
businesses.
Consumer preferences for products and packaging formats are constantly changing based on, among other
factors, cost, convenience, and health, environmental and social concerns and perceptions. For example,
changing consumer dietary habits and preferences have slowed the sales growth for certain of the food and
beverage products we package. Also, there is an increasing focus among consumers to ensure that products
delivered through e-commerce are packaged efficiently. For instance, Amazon has begun requiring that all items
sold through Amazon that are larger than a specified size be designed and certified as ready-to-ship. Our results of
operations, cash flows and financial condition, and the trading price of our Common Stock, could be adversely
affected if we fail to anticipate trends that would enable us to offer products that respond to changing customer
preferences.
Our Capital Expenditures May Not Achieve the Desired Outcomes or May Be Achieved at a Higher Cost
than Anticipated
We regularly make capital expenditures and many of our capital projects are complex, costly and/or
implemented over an extended period of time. For example, in fiscal 2019, we completed strategic capital projects
at our Porto Feliz corrugated box plant in the Brazilian state of Sao Paulo, our Cottonton, Alabama and Covington,
Virginia mills, and we continue to invest in strategic projects at our Florence, South Carolina and Tres Barras,
Brazil mills. Our capital expenditures for these and other capital projects could be higher than we anticipated, we
may experience unanticipated business disruptions and/or we may not achieve the desired benefits from the
capital projects, any of which could adversely affect our results of operations, cash flows and financial condition,
and the trading price of our Common Stock. In addition, disputes between us and contractors who are involved
with implementing capital projects could lead to time-consuming and costly litigation.
We are Exposed to Risks Related to International Sales and Operations
We derived 18.2% of our net sales in fiscal 2019 from outside the U.S. through international operations, some
of which were transacted in U.S. dollars. In addition, certain of our domestic operations have sales to foreign
customers. Our operating results and business prospects could be adversely affected by risks related to the
countries outside the U.S. in which we have manufacturing facilities or sell our products. Specifically, Brazil, China,
Mexico and India, where we maintain operations directly or through a joint venture, are exposed to varying degrees
of economic, political and social instability. We are exposed to risks of operating in those countries, as well as
others, including, but not limited to, risks associated with:
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the difficulties with and costs of complying with a wide variety of complex laws, treaties and regulations;
unexpected changes in political or regulatory environments; earnings and cash flows that may be subject
to tax withholding requirements or the imposition of tariffs, exchange controls or other restrictions;
repatriating cash from foreign countries to the U.S.;
political, economic and social instability;
import and export restrictions and other trade barriers;
responding to disruptions in existing trade agreements or increased trade tensions between countries or
political and economic unions;
• maintaining overseas subsidiaries and managing international operations;
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obtaining regulatory approval for significant transactions;
government limitations on foreign ownership or takeovers, nationalizations of business or mandated price
controls;
fluctuations in foreign currency exchange rates; and
transfer pricing.
Any one or more of these risks could adversely affect our international operations and our results of
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operations, cash flows and financial condition, and the trading price of our Common Stock.
We Cannot Operate Our Joint Ventures Solely For Our Benefit, Which Subjects Us to Risks
We have invested in joint ventures and may form additional joint ventures in the future. Our participation in
joint ventures is subject to risks, including, but not limited to, risks associated with:
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shared decision-making, which could require us to expend additional resources to resolve impasses or
potential disputes;
• maintaining good relationships with our partners, which could limit our future growth potential;
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conflict of interest issues if our partners have competing interests;
investment or operational goals that conflict with our partners’ goals, including the timing, terms and
strategies for investments or future growth opportunities;
our partners’ ability to fund their share of required capital contributions or to otherwise fulfill their
obligations as partners; and
obtaining consents from our partners for any sale or other disposition of our interest in a joint venture or
underlying assets of the joint venture.
We May Produce Faulty or Contaminated Products Due to Failures in Quality Control Measures and
Systems
Our failure to produce products that meet safety and quality standards could result in adverse effects on
consumer health, litigation exposure, loss of market share and adverse financial impacts, among other potential
consequences, and we may incur substantial costs in taking appropriate corrective action (up to and including
recalling products from end consumers) and to reimburse customers and/or end consumers for losses that they
suffer as a result of these failures. Our actions or omissions with respect to product safety and quality could lead to
regulatory investigations, enforcement actions and/or prosecutions, and result in adverse publicity, which may
damage our reputation. Any of these results could adversely affect our results of operations, cash flows and
financial condition, and the trading price of our Common Stock.
We provide guarantees or representations in certain of our contracts that our products are produced in
accordance with customer specifications. If the product contained in packaging manufactured by us is faulty or
contaminated, the manufacturer of the product may allege that the packaging we provided caused the fault or
contamination, even if the packaging complies with contractual specifications. If our packaging fails to function
properly or to preserve the integrity of its contents, we could face liability from our customers and third parties for
bodily injury or other damages. These liabilities could adversely affect our results of operations, cash flows and
financial condition, and the trading price of our Common Stock.
We Depend on Certain Large Customers
Our Corrugated Packaging and Consumer Packaging segments have large customers, the loss of which
could adversely affect each segment’s sales and, depending on the significance of the loss, our results of
operations, cash flows and financial condition, and the trading price of our Common Stock. In particular, because
our businesses operate in highly competitive industry segments, we regularly bid for new business or for the
renewal of existing business. The loss of business from our larger customers, or the renewal of business on less
favorable terms, may adversely impact our financial results.
We are Subject to Cyber-Security Risks, Including Related to Customer, Employee, Vendor or Other
Company Data
We use information technologies to securely manage operations and various business functions. We rely on
various technologies, some of which are managed by third parties, to process, transmit and store electronic
information, and to manage or support a variety of business processes and activities, including reporting on our
business and interacting with customers, vendors and employees. In addition, we collect and store data, including
proprietary business information, and may have access to confidential or personal information in certain of our
businesses that is subject to privacy and security laws, regulations and customer-imposed controls. Our systems
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are subject to repeated attempts by third parties to access information or to disrupt our systems. Despite our
security design and controls, and those of our third-party providers, we may become subject to system damage,
disruptions or shutdowns due to any number of causes, including cyber-attacks, breaches, employee error or
malfeasance, power outages, telecommunication or utility failures, systems failures, service providers, natural
disasters or other catastrophic events. These vulnerabilities may remain undetected for an extended period of
time. We may face other challenges and risks as we upgrade and standardize our information technology systems
as part of our integration of acquired businesses and operations. We maintain contingency plans to prevent or
mitigate the impact of these events; however, these events could result in operational disruptions or the
misappropriation of sensitive data, and depending on their nature and scope, could lead to the compromise of
confidential information, improper use of our systems and networks, manipulation and destruction of data,
defective products, production downtimes, operational disruptions and exposure to liability. Such disruptions or
misappropriations and the resulting repercussions, including reputational damage and legal claims or proceedings,
may adversely affect our results of operations, cash flows and financial condition, and the trading price of our
Common Stock.
We May Be Adversely Impacted By Work Stoppages and Other Labor Relations Matters
A significant number of our union employees are governed by CBAs. Expired contracts are in the process of
renegotiation and others expire within one year. For example, we are negotiating a successor agreement to the
original master agreement with the USW, which is scheduled to expire October 2020. We may not be able to
successfully negotiate new union contracts without work stoppages or labor difficulties or renegotiate them on
favorable terms. We have experienced work stoppages in the past and may experience them in the future. If we
are unable to successfully renegotiate the terms of any of these agreements, or if we experience any extended
interruption of operations at any of our facilities as a result of strikes or other work stoppages, our results of
operations, cash flows and financial condition, and the trading price of our Common Stock, could be adversely
affected. In addition, our businesses rely on vendors, suppliers and other third parties that have union employees.
Strikes or work stoppages affecting these vendors, suppliers and other third parties could adversely affect our
results of operations, cash flows and financial condition, and the trading price of our Common Stock.
We May Fail to Attract, Motivate, Train and Retain Qualified Personnel, Including Key Personnel
Our success depends on our ability to attract, motivate, train and retain employees with the skills necessary to
understand and adapt to the continuously developing needs of our customers. The increasing demand for qualified
personnel makes it more difficult for us to attract and retain employees with requisite skill sets, particularly
employees with specialized technical and trade experience. Changing demographics and labor work force trends
also may result in a loss of knowledge and skills as experienced workers retire. If we fail to attract, motivate, train
and retain qualified personnel, or if we experience excessive turnover, we may experience declining sales,
manufacturing delays or other inefficiencies, increased recruiting, training and relocation costs and other
difficulties, and our results of operations, cash flows and financial condition, and the trading price of our Common
Stock may be adversely impacted.
We rely on key executive and management personnel to manage our business efficiently and effectively. The
loss of any of our key personnel could adversely affect our results of operations, cash flows and financial condition,
and the trading price of our Common Stock may be adversely impacted. In particular, our failure to identify
candidates with the leadership skills to manage our increasingly complex organization, and our failure to ensure
effective transfers of knowledge and smooth transitions involving key executives, could hinder our strategic
planning and execution.
Financial Risks
We May Be Adversely Affected by Factors That Are Beyond Our Control, Such as U.S. and Worldwide
Economic and Financial Market Conditions, and Social and Political Change
Our businesses may be adversely affected by a number of factors that are beyond our control, including, but
not limited to:
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changes in tax laws or tax rates and conditions in the financial services markets, including counterparty
risk, insurance carrier risk, rising interest rates, inflation, deflation, fluctuations in the value of local
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currency versus the U.S. dollar and the impact of a stronger U.S. dollar;
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financial uncertainties in our major international markets, including uncertainties surrounding the United
Kingdom’s withdrawal from the European Union, commonly referred to as “Brexit”;
social and political change impacting matters such as sustainability, environmental regulations and trade
policies and agreements; or
government deficit reduction and other austerity measures in specific countries or regions, or in the various
industries in which we operate.
For example, we may experience lower demand for our products and the products of our customers that
utilize our products if economic conditions in the U.S. and globally (including in Europe, Brazil and Mexico)
deteriorate and result in higher unemployment rates, lower family income, unfavorable currency exchange rates,
lower corporate earnings, lower business investment or lower consumer spending. In addition, changes in trade
policy, including renegotiating or potentially terminating, existing bilateral or multilateral agreements, as well as the
imposition of tariffs, could impact demand for our products and the costs associated with certain of our capital
investments. Macro-economic challenges may also lead to changes in tax laws or tax rates that may have a
material impact on our future cash taxes, effective tax rate or deferred tax assets and liabilities. We are not able to
predict with certainty economic and financial market conditions, and social and political change, and our results of
operations, cash flows and financial condition, and the trading price of our Common Stock, could be adversely
affected by adverse market conditions and social and political change.
The Level of Our Indebtedness Could Adversely Affect Our Financial Condition and Impair Our Ability to
Operate Our Business
At September 30, 2019, we had $10.1 billion of debt outstanding. The level of our indebtedness could have
important consequences, including:
•
•
•
•
•
a portion of our cash flows from operations will be dedicated to payments on indebtedness and will not be
available for other purposes, including operations, capital expenditures and future business opportunities,
including acquisitions;
we may be limited in our ability to obtain additional financing for working capital, capital expenditures,
future business opportunities, acquisitions, general corporate and other purposes;
our indebtedness that is subject to variable rates of interest exposes us to increased debt service
obligations in the event of increased interest rates;
we may be limited in our ability to adjust to changing market conditions, which would place us at a
competitive disadvantage compared to competitors that have less debt; and
our vulnerability to a downturn in general economic conditions or in our business may increase, and we
may be unable to carry out important capital spending.
Certain of our variable rate debt uses the London Interbank Offered Rate (“LIBOR”) as a benchmark for
establishing the interest rate. The U.K. Financial Conduct Authority announced in 2017 that it intends to phase out
LIBOR by the end of 2021. In addition, other regulators have suggested reforming or replacing other benchmark
rates. The discontinuation, reform or replacement of LIBOR or any other benchmark rates may have an
unpredictable impact on contractual mechanics in the credit markets or cause disruption to the broader financial
markets. Uncertainty as to the nature of such potential discontinuation, reform or replacement may negatively
impact the cost of our variable rate debt.
We are subject to agreements that require us to meet and maintain certain financial ratios and covenants and
may restrict us from, among other things, disposing of assets and incurring additional indebtedness. These
restrictions may limit our flexibility to respond to changing market conditions and competitive pressures.
Credit Rating Downgrades Could Increase Our Borrowing Costs or Otherwise Adversely Affect Us
Some of our outstanding indebtedness has received credit ratings from rating agencies. Our credit ratings
could change based on, among other things, our results of operations and financial condition. Credit ratings are
subject to ongoing evaluation by credit rating agencies and may be lowered, suspended or withdrawn entirely by a
rating agency or placed on a “watch list” for a possible downgrade or assigned a “negative outlook”. Actual or
24
anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under
review for a downgrade or have been assigned a negative outlook, could increase our borrowing costs, which
could in turn adversely affect our results of operations, cash flows and financial condition, and the trading price of
our Common Stock. If a downgrade were to occur or a negative outlook were to be assigned, it could impact our
ability to access the capital markets to raise debt and/or increase the associated costs. In addition, while our credit
ratings are important to us, we may take actions and otherwise operate our business in a manner that adversely
affects our credit ratings.
We sell short-term receivables from certain customer trade accounts on a revolving basis. Any downgrade of
the credit rating or deterioration of the financial condition of these customers may make it more costly or difficult for
us to engage in these activities, which could adversely affect our cash flows and liquidity.
We Have a Significant Amount of Goodwill and Other Intangible Assets and a Write-Down Would
Adversely Impact Our Operating Results and Shareholders’ Equity
At September 30, 2019, the carrying value of our goodwill and intangible assets was $11.3 billion. We review
the carrying value of our goodwill for impairment annually, or more frequently when impairment indicators exist.
The impairment test requires us to analyze a number of factors and make estimates that require judgment. In fiscal
2019, we identified our Consumer Packaging and Victory Packaging reporting units as having fair values that
exceeded their carrying values by less than 10%. Future changes in the cost of capital, expected cash flows,
changes in our business strategy and external market conditions, among other factors, could require us to record
an impairment charge for goodwill, which could lead to decreased assets and reduced net income. If a significant
write down were required, the charge could have a material adverse effect on our operating results and
shareholders’ equity, and could impact the trading price of our Common Stock. See “Note 1. Description of
Business and Summary of Significant Accounting Policies — Goodwill and Long-Lived Assets” of the
Notes to Consolidated Financial Statements for additional information.
Our Pension Plans Will Likely Require Additional Cash Contributions
We expect to continue to make contributions to our pension plans in the coming years in order to ensure that
our funding levels remain adequate and meet the requirements of the Pension Act and other regulations. At
September 30, 2019, our pensions were underfunded by approximately $0.1 billion. The actual required amounts
and timing of future cash contributions will be highly sensitive to changes in the applicable discount rates and
returns on plan assets, and could also be impacted by future changes in the laws and regulations applicable to
plan funding. Our pension plan assets are primarily made up of fixed income, equity and alternative investments.
Fluctuations in the market performance of these assets and changes in interest rates may result in increased or
decreased pension plan costs in future periods. Changes in assumptions regarding expected long-term rate of
return on plan assets, our discount rate, expected compensation levels or mortality could also increase or
decrease pension costs. These changes, along with future turmoil in financial and capital markets, may adversely
affect our results of operations, cash flows and financial condition, and the trading price of our Common Stock.
We May Incur Additional Restructuring Costs and May Not Realize Expected Benefits from Restructuring
We have previously restructured portions of our operations and likely will engage in future restructuring
initiatives. Because we are not able to predict with certainty market conditions, including changes in the supply and
demand for our products, the loss of large customers, the selling prices for our products or our manufacturing
costs, we may not be able to predict with certainty the appropriate time to undertake restructurings. The cash and
non-cash costs associated with these activities vary depending on the type of facility impacted, with the non-cash
cost of a mill closure generally being more significant than that of a converting facility due to the higher level of
investment. Restructuring activities may divert the attention of management, disrupt our operations and fail to
achieve the intended cost and operations benefits.
We May Utilize Our Cash Flow or Incur Additional Indebtedness to Satisfy Certain Payment Obligations
Related to, or Otherwise Increase our Investment in, Grupo Gondi
In connection with our investment in the joint venture with Grupo Gondi, we entered into an option agreement
pursuant to which we and certain shareholders of Grupo Gondi agreed to future put and call options with respect to
the equity interests in the joint venture held by each party. We own 32.3% of the joint venture. Pursuant to the
option agreement, our joint venture partners may exercise a right on April 1, 2020 to sell us up to 24% of the equity
25
interest in Grupo Gondi at fair market value and, between October 1, 2020 and April 1, 2021, we may exercise a
right to purchase an additional 18.7% equity interest in Grupo Gondi from our joint venture partners at a
predetermined purchase price. If we exercise our right to purchase the additional 18.7% equity interest, our
partners may elect to sell us their remaining interest at fair market value at that time, or a portion thereof in the
future in accordance with the terms of the option agreement. In addition, in the event that we do not exercise our
right to purchase the additional 18.7% equity interest, our joint venture partners may call our 32.3% equity interest
at a predetermined price between October 1, 2021 and April 1, 2022. These arrangements, or other arrangements
pursuant to which we increase our ownership in Grupo Gondi, may require us to dedicate a substantial portion of
our cash flow to satisfy our payment or investment obligations, which may reduce the amount of funds available for
our operations, capital expenditures and corporate development activities. Also, we may be required to incur
additional indebtedness or issue equity securities in order to satisfy our payment or investment obligations.
We May Incur Withdrawal Liability and/or Increased Funding Requirements in Connection with MEPPs
We participate in several MEPPs. Our contributions to any particular MEPP may increase based on the
declining funded status of a MEPP and legal requirements, such as those of the Pension Act, which require
substantially underfunded MEPPs to implement a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”)
to improve their funded status. The funded status of a MEPP may be impacted by, among other items, a shrinking
contribution base as a result of the insolvency or withdrawal of other companies that currently contribute to these
plans, the inability or failure of companies withdrawing from the plan to pay their withdrawal liability, low interest
rates, changes in actuarial assumptions and/or lower than expected returns on pension fund assets.
We believe that certain of the MEPPs in which we participate or have participated, including PIUMPF, have
material unfunded vested benefits. In fiscal 2018, we submitted formal notification to withdraw from PIUMPF and
the Central Sates, Southeast and Southwest Areas Pension Fund (“Central States”), and recorded aggregate
withdrawal liabilities of $184.2 million (nearly all of which was for PIUMPF), which includes an estimate of our
portion of PIUMPF’s accumulated funding deficiency. We may withdraw from other MEPPs in the future.
In September 2019, we received a demand from PIUMPF asserting that we owe $170.3 million on an
undiscounted basis (approximately $0.7 million per month for the next 20 years) with respect to our withdrawal
liability. The demand did not address any assertion of liability for PIUMPF’s accumulated funding deficiency. We
expect to begin making monthly payments for these withdrawal liabilities in fiscal 2020.
The impact of increased contributions, future funding obligations or future withdrawal liabilities may adversely
affect our results of operations, cash flows and financial condition, and the trading price of our Common Stock. See
“Note 5. Retirement Plans — Multiemployer Plans” of the Notes to Consolidated Financial Statements for
additional information, including a summary of the demand letters we received from PIUMPF.
Legal and Regulatory Risks
We are Subject to a Wide Variety of Laws, Regulations and Other Requirements That are Subject to
Change and May Impose Substantial Compliance Costs
We are subject to a wide variety of federal, state, local and foreign laws, regulations and other requirements,
including those relating to the environment, product safety, competition, corruption, occupational health and safety,
labor and employment, data privacy, tax and health care. These laws, regulations and other requirements may
change or be applied or interpreted in ways that will require us to modify our equipment and/or operations, subject
us to enforcement risk, expose us to reputational harm or impose on or require us to incur additional costs,
including substantial compliance costs, which may adversely affect our results of operations, cash flows and
financial condition, and the trading price of our Common Stock.
We have incurred, and expect to continue to incur, significant capital, operating and other expenditures
complying with applicable environmental, health and safety laws and regulations. Our environmental expenditures
include those related to air and water quality, waste disposal and the cleanup of contaminated soil and
groundwater, including situations where we have been identified as a PRP. Because environmental, health and
safety regulations are constantly evolving, we will continue to incur costs to maintain compliance with those laws
and our compliance costs could increase materially. Future compliance with existing and new laws and
requirements may disrupt our business operations and require significant expenditures, and our existing reserves
for specific matters may not be adequate to cover future costs. In particular, our manufacturing operations
26
consume significant amounts of energy, and we may in the future incur additional or increased capital, operating
and other expenditures from changes due to new or increased climate-related and other environmental
regulations. We could also incur substantial liabilities, including fines or sanctions, enforcement actions, natural
resource damages claims, cleanup and closure costs, and third-party claims for property damage and personal
injury under environmental and common laws.
The Foreign Corrupt Practices Act of 1977 and local anti-bribery laws, including those in Brazil, China,
Mexico, India and the United Kingdom (where we maintain operations directly or through a joint venture), prohibit
companies and their intermediaries from making improper payments to government officials for the purpose of
influencing official decisions. Our internal control policies and procedures, or those of our vendors, may not
adequately protect us from reckless or criminal acts committed or alleged to have been committed by our
employees, agents or vendors. Any such violations could lead to civil or criminal monetary and non-monetary
penalties and/or could damage our reputation.
We are subject to a number of labor and employment laws and regulations that could significantly increase
our operating costs and reduce our operational flexibility. Additionally, changing privacy laws in the United States
(including the California Consumer Privacy Act, which will become effective in January 2020), Europe (where the
General Data Protection Regulation became effective in 2018) and elsewhere have created new individual privacy
rights, imposed increased obligations on companies handling personal data and increased potential exposure to
fines and penalties.
Item 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved SEC staff comments.
Item 2.
PROPERTIES
We operate locations in North America, including the majority of U.S. states, South America, Europe, Asia and
Australia. We lease our principal offices in Atlanta, GA. We believe that our existing production capacity is
adequate to serve existing demand for our products and consider our plants and equipment to be in good
condition.
Our corporate and operating facilities as of September 30, 2019 are summarized below:
Segment
Corrugated Packaging
Consumer Packaging
Corporate and significant regional offices
Total
Number of Facilities
Owned Leased
61
55
10
126
112
84
—
196
Total
173
139
10
322
The tables that follow show our annual production capacity by mill at September 30, 2019 in thousands of tons,
except for the North Charleston, SC mill which reflects our capacity after the previously announced machine
closure expected to occur in fiscal 2020. Our mill system production levels and operating rates may vary from year
to year due to changes in market and other factors, including the impact of hurricanes and other weather-related
events. Our simple average mill system operating rates for the last three years averaged 94%. We own all of our
mills.
27
Corrugated Packaging Mills - annual production capacity in thousands of tons
Linerboard Medium
510
315
930
White Top
Linerboard
Kraft
Paper/Bag
375
Saturating
Kraft /
Folding
Carton
Market
Pulp
Bleached
Paperboard
Location of Mill
Longview, WA
Fernandina Beach, FL
West Point, VA
Stevenson, AL
Solvay, NY
Hodge, LA
Florence, SC
Panama City, FL
Dublin, GA
North Charleston, SC
Seminole, FL
Tres Barras, Brazil
Hopewell, VA
Roanoke Rapids, NC
Tacoma, WA
La Tuque, QC
Cowpens, SC
St. Paul, MN
Morai, India
Total Capacity
185
885
272
137
198
185
548
800
683
353
137
235
402
360
527
290
90
45
185
200
25
6,065 2,587
155
735
292
341
370
210
60
275
345
60
1,355
986
370
352
Total
Capacity
1,200
930
920
885
820
800
683
645
615
605
600
545
527
500
485
476
230
200
180
131 11,846
131
Our fiber sourcing for our Corrugated Packaging mills is approximately 62% virgin and 38% recycled.
Consumer Packaging Mills - annual production capacity in thousands of tons
Location of Mill
Mahrt, AL
Covington, VA
Evadale, TX
Demopolis, AL
St. Paul, MN
Battle Creek, MI
Chattanooga, TN
Dallas, TX
Lynchburg, VA
Sheldon Springs, VT
(Missisquoi Mill)
Stroudsburg, PA
Eaton, IN
Aurora, IL
Total Capacity
Bleached
Paperboard
Coated
Natural
Kraft
Coated
Recycled
Paperboard
Specialty
Recycled
Paperboard
Market
Pulp
1,066
950
660
360
170
160
127
111
80
1,970
1,066
648
40
110
150
140
118
64
32
354
Total
Capacity
1,066
950
700
470
170
160
140
127
118
111
80
64
32
4,188
The production at our Lynchburg, VA mill is gypsum paperboard liner and the paper machine at this mill is
owned by our Seven Hills joint venture. Our fiber sourcing for our Consumer Packaging mills is approximately 75%
virgin and 25% recycled. Our overall fiber sourcing for mills is approximately 65% virgin and 35% recycled.
28
At September 30, 2019, we owned approximately 135,000 acres of forestlands in Brazil.
Item 3.
LEGAL PROCEEDINGS
We are a defendant in a number of lawsuits and claims arising out of the conduct of our business. While the
ultimate results of such suits or other proceedings against us cannot be predicted with certainty, we believe the
resolution of these matters will not have a material adverse effect on our consolidated financial condition, results of
operations or cash flows.
See “Note 18. Commitments and Contingencies” of the Notes to Consolidated Financial Statements for
additional information.
Item 4.
MINE SAFETY DISCLOSURES
Not applicable.
29
PART II: FINANCIAL INFORMATION
Item 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock
Our Common Stock trades on the New York Stock Exchange (“NYSE”) under the symbol “WRK”. As of
November 4, 2019, there were approximately 6,506 stockholders of record of our Common Stock. The number of
stockholders of record includes one single stockholder, Cede & Co., for all of the shares of our Common Stock
held by our stockholders in individual brokerage accounts maintained at banks, brokers and institutions.
Dividends
In November 2019, our board of directors declared a quarterly dividend of $0.465 per share, representing a
2.2% increase from the prior $0.455 per share quarterly dividend and an annual dividend of $1.86 per share.
During fiscal 2019, we paid an annual dividend of $1.82 per share. During fiscal 2018, we paid an annual dividend
of $1.72 per share. During fiscal 2017, we paid an annual dividend of $1.60 per share.
Securities Authorized for Issuance Under Equity Compensation Plans
See Part III, Item 12 of this Form 10-K and “Note 20. Stockholders’ Equity” of the Notes to Consolidated
Financial Statements for additional information.
Stock Repurchase Plan
See “Note 20. Stockholders’ Equity” of the Notes to Consolidated Financial Statements for additional
information.
Item 6.
SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in conjunction with our consolidated financial
statements and notes thereto and Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations”. WRKCo was the accounting acquirer in the KapStone Acquisition; therefore, the
historical consolidated financial statements of WRKCo for periods prior to the transaction (which was completed on
November 2, 2018) are also considered to be the historical financial statements of the Company. We derived the
consolidated statements of income and consolidated statements of cash flows data for the years ended
September 30, 2019, 2018 and 2017 and the consolidated balance sheet data as of September 30, 2019 and 2018
from the Consolidated Financial Statements included herein. We derived the consolidated statements of
operations and consolidated statements of cash flows data for the year ended September 30, 2016 and 2015 and
the consolidated balance sheet data as of September 30, 2017, 2016 and 2015 from audited financial statements
not included in this report.
30
The impact from acquisitions was the primary driver of the changes in the selected financial data in fiscal 2016,
2018 and 2019 as compared to prior years in varying degrees due to the size and timing of the transactions. See
“Note 3. Acquisitions and Investment” of the Notes to Consolidated Financial Statements for additional
information. The selected financial data has been updated to reflect the Separation. Our results of operations
shown below may not be indicative of future results.
(In millions, except per share amounts)
2019
Year Ended September 30,
2017
2016
2018
2015
Net sales
Multiemployer pension withdrawal (income)
expense (1)
Pension risk transfer expense (2)
Pension lump sum settlement and retiree medical
curtailment, net (3)
Land and Development impairments (4)
Restructuring and other costs (5)
Gain on sale of HH&B (6)
Income from continuing operations (7)
(Loss) income from discontinued operations
(net of tax) (8)
$18,289.0 $16,285.1 $14,859.7 $14,171.8 $ 11,124.8
$
$
$
$
$
$
$
$
(6.3) $
— $
184.2 $
— $
— $
— $
— $
370.7 $
—
—
— $
13.0 $
173.7 $
— $
— $
31.9 $
105.4 $
— $
867.9 $ 1,909.3 $
32.6 $
46.7 $
196.7 $
192.8 $
698.6 $
— $
— $
366.4 $
— $
154.8 $
11.5
—
140.8
—
501.2
— $
— $
— $
(544.7) $
10.6
Net income (loss) attributable to
common stockholders
Diluted earnings per share from
continuing operations
Diluted (loss) earnings per share from
discontinued operations
Diluted earnings (loss) per share attributable
to common stockholders
Diluted weighted average shares outstanding
Dividends paid per common share
Book value per common share
Total assets
Current portion of debt
Long-term debt due after one year
Total debt
Total stockholders’ equity
Net cash provided by operating activities
Capital expenditures
Cash paid (received) for purchase of
businesses, net of cash acquired
Cash received in merger
Purchases of common stock
Purchases of commons stock - merger related
Cash dividends paid to stockholders
$
862.9 $ 1,906.1 $
708.2 $
(396.3) $
507.1
$
$
3.33 $
7.34 $
2.77 $
0.59 $
2.87
— $
— $
— $
(2.13) $
0.06
$
3.33 $
259.1
1.82 $
45.27 $
7.34 $
259.8
1.72 $
45.24 $
(1.54) $
257.9
1.50 $
38.75 $
2.77 $
255.7
1.60 $
40.64 $
2.93
173.3
1.20
$
$
45.34
$30,156.7 $25,360.5 $25,089.0 $23,038.2 $ 25,372.4
$
63.7
$ 9,502.3 $ 5,674.5 $ 5,946.1 $ 5,496.3 $ 5,558.2
$10,063.4 $ 6,415.2 $ 6,554.8 $ 5,789.2 $ 5,621.9
$11,669.9 $11,469.4 $10,342.5 $ 9,728.8 $ 11,651.8
865.7
$ 2,310.2 $ 1,931.2 $ 1,463.8 $ 1,223.3 $
585.5
796.7 $
$ 1,369.1 $
292.9 $
778.6 $
608.7 $
740.7 $
561.1 $
999.9 $
$ 3,374.2 $
— $
$
88.6 $
$
— $
$
467.9 $
$
239.9 $ 1,588.5 $
— $
93.0 $
— $
403.2 $
— $
195.1 $
— $
440.9 $
376.4 $
— $
335.3 $
— $
380.7 $
(3.7)
265.7
336.7
667.8
214.5
(1)
(2)
In fiscal 2018, we recorded an estimated withdrawal liability of $180.0 million to withdraw from PIUMPF and $4.2 million to
withdraw from Central States. See “Note 5. Retirement Plans — Multiemployer Plans” of the Notes to Consolidated
Financial Statements for additional information.
In fiscal 2016, we used plan assets to settle $2.5 billion of pension obligations of the WestRock Company Consolidated
Pension Plan (the “Plan”) by purchasing group annuity contracts from the Prudential Insurance Company of America, a
subsidiary of Prudential Financial, Inc. (“Prudential”). This transaction transferred payment responsibility to Prudential for
retirement benefits owed to approximately 35,000 U.S. retirees and their beneficiaries. As a result, we recorded a non-cash
charge of $370.7 million pre-tax, which is included in the consolidated statements of income in the line item “Pension and
other postretirement non-service income (expense)”.
31
(3)
(4)
In fiscal 2017, lump sum payments to certain beneficiaries of the Plan, together with several one-time severance benefit
payments out of the Plan, triggered pension settlement accounting and a remeasurement of the Plan. As a result of
settlement accounting, we recognized as a current period expense a pro-rata portion of the unamortized net actuarial loss,
after remeasurement, and recorded a $32.6 million non-cash charge to our earnings, which is included in the consolidated
statements of income in the line item “Pension and other postretirement non-service income (expense)”. See “Note 5.
Retirement Plans” of the Notes to Consolidated Financial Statements for additional information. In fiscal 2015, payments
were made to former employees to partially settle obligations of one of our qualified defined benefit pension plans and we
recorded a non-cash pre-tax charge of $20.0 million. In addition, changes in retiree medical coverage for certain
employees covered by the USW master agreement resulted in the recognition of an $8.5 million pre-tax curtailment gain.
These two items netted to an $11.5 million pre-tax charge.
In fiscal 2019, we recorded a $13.0 million pre-tax non-cash impairment of certain mineral rights. In fiscal 2018, we
recorded a $31.9 million pre-tax non-cash impairment of certain mineral rights and real estate. The $23.6 million
impairment of mineral rights in fiscal 2018 was driven by the non-renewal of a lease and associated with declining oil and
gas prices, and the other $8.3 million was recorded to write-down the carrying value on real estate projects. Similarly, in
fiscal 2017, we recorded a pre-tax non-cash real estate impairment of $46.7 million, or $39.7 million net of $7.0 million of
noncontrolling interest. Due to the accelerated monetization strategy in our Land and Development segment, the real
estate impairments were recorded to write-down the carrying value on projects where the projected sales proceeds were
less than the carrying value.
(5) Costs recorded in each period are not comparable since the timing and scope of the individual actions vary. The
restructuring and other costs exclude the Specialty Chemicals costs, which are included in discontinued operations in fiscal
2016. See “Note 4. Restructuring and Other Costs” of the Notes to Consolidated Financial Statements for additional
information regarding the type of costs incurred.
(6) On April 6, 2017, we completed the HH&B Sale. In fiscal 2017, we recorded a pre-tax gain on sale of HH&B of $192.8
million. See “Note 1. Description of Business and Summary of Significant Accounting Policies — Description of
Business” of the Notes to Consolidated Financial Statements for additional information.
(7)
(8)
Income from continuing operations was impacted by the HH&B Sale, restructuring and other costs, the Land and
Development impairment, multiemployer pension withdrawals, the pension lump sum settlements (including retiree medical
curtailment) and pension risk transfer as identified in the table above for the respective years. In addition, income from
continuing operations in fiscal 2018 included an income tax benefit of $1,128.8 million related to the Tax Act. See “Note 6.
Income Taxes — Impacts of the Tax Act” of the Notes to Consolidated Financial Statements for additional information.
Income from continuing operations in fiscal 2019, 2017 and 2015 was reduced by $24.7 million, $26.5 million and $64.7
million, respectively, pre-tax for the expensing of inventory stepped-up in purchase accounting, primarily related to the
KapStone Acquisition, the MPS Acquisition and the Combination, respectively.
Loss from discontinued operations, net of tax in fiscal 2016 included a $478.3 million pre-tax goodwill impairment charge
and $101.1 million pre-tax customer list impairment charge associated with our former Specialty Chemicals operations.
Income from discontinued operations, net of tax in fiscal 2015 was reduced by $8.2 million pre-tax for the expensing of
inventory stepped-up in purchase accounting.
32
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
We are a multinational provider of paper and packaging solutions for consumer and corrugated packaging
markets. We partner with our customers to provide differentiated paper and packaging solutions that help them win
in the marketplace. Our team members support customers around the world from our operating and business
locations in North America, South America, Europe, Asia and Australia.
Organization
WestRock was formed on March 6, 2015 for the purpose of effecting the Combination and, prior to the
Combination, did not conduct any activities other than those incidental to its formation and the matters
contemplated by the Business Combination Agreement. On July 1, 2015, pursuant to the Business Combination
Agreement, RockTenn and MWV completed a strategic combination of their respective businesses and RockTenn
and MWV each became wholly-owned subsidiaries of WestRock. RockTenn was the accounting acquirer in the
Combination.
On April 6, 2017, we completed the HH&B Sale. We used the proceeds from the HH&B Sale in connection with
the MPS Acquisition. We recorded a pre-tax gain on sale of HH&B of $192.8 million in fiscal 2017. See “Note 1.
Description of Business and Summary of Significant Accounting Policies — Description of Business” of
the Notes to Consolidated Financial Statements for additional information. On June 6, 2017, we completed the
MPS Acquisition. MPS is reported in our Consumer Packaging segment. On November 2, 2018, we completed the
KapStone Acquisition. As a result, among other things, the Company became the ultimate parent of WRKCo,
KapStone and their respective subsidiaries, and the Company changed its name to “WestRock Company” and
WRKCo changed its name to “WRKCo Inc.”. See “Note 3. Acquisitions and Investment” of the Notes to
Consolidated Financial Statements for additional information.
Presentation
Effective in the first quarter of fiscal 2019, we aligned our financial results for all periods presented to move our
merchandising displays operations from our Consumer Packaging segment to our Corrugated Packaging segment
and to allocate certain previously non-allocated costs and certain pension and other postretirement non-service
income (expense) to our reportable segments. Separately, in the first quarter of fiscal 2019, we began conducting
our recycling operations primarily as a procurement function. Since then, recycling net sales have not been
recorded and the margin from these operations has reduced cost of goods sold. Following the realignment, we
report our financial results of operations in the following three reportable segments: Corrugated Packaging, which
consists of our containerboard mills, corrugated packaging and distribution operations, as well as our
merchandising displays and recycling procurement operations; Consumer Packaging, which consists of our
consumer mills, food and beverage and partition operations; and Land and Development, which sells real estate,
primarily in the Charleston, SC region. Prior to the HH&B Sale, our Consumer Packaging segment included HH&B.
A detailed discussion of the fiscal 2019 year-over-year changes can be found below and a detailed discussion
of fiscal 2018 year-over-year changes can be found in “Item 7. “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Exhibit 99.1 of our Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 9, 2019 (the “May 9, 2019 Form 8-K”), which was, as disclosed
therein, filed to provide revisions to the Company’s consolidated financial statements, and the notes thereto for the
three years ended September 30, 2018 and other related disclosures.
Acquisitions and Investments
During fiscal 2019 and 2018, we completed acquisitions that expanded our product and geographic scope,
allowed us to increase our integration levels and impacted our comparative financials. We expect to continue to
evaluate similar potential acquisitions in the future, although the size of individual acquisitions may vary. Below we
summarize certain of these acquisitions.
On November 2, 2018, we completed the KapStone Acquisition. KapStone is a leading North American
producer and distributor of containerboard, corrugated products and specialty papers, including liner and medium
33
containerboard, kraft papers and saturating kraft. KapStone also owns Victory Packaging, a packaging solutions
distribution company with facilities in the U.S., Canada and Mexico. We have included the financial results of
KapStone in our Corrugated Packaging segment since the date of the acquisition.
On September 4, 2018, we completed the acquisition (the “Schlüter Acquisition”) of Schlüter Print Pharma
Packaging (“Schlüter”). Schlüter is a leading provider of differentiated paper and packaging solutions and a
German-based supplier of a full range of leaflets and booklets. The Schlüter Acquisition allowed us to further
enhance our pharmaceutical and automotive platform and expand our geographical footprint in Europe to better
serve our customers. We have included the financial results of the acquired operations in our Consumer
Packaging segment since the date of the acquisition.
On January 5, 2018, we completed the acquisition (the “Plymouth Packaging Acquisition”) of substantially
all of the assets of Plymouth Packaging, Inc. (“Plymouth”). The assets we acquired included Plymouth’s “Box on
Demand” systems, which are manufactured by Panotec, an Italian manufacturer of packaging machines. The
addition of the Box on Demand systems enhanced our platform, differentiation and innovation. These systems,
which are located on customers’ sites under multi-year exclusive agreements, use fanfold corrugated to produce
custom, on-demand corrugated packaging that is accurately sized for any product type according to the customer’s
specifications. Fanfold corrugated is continuous corrugated board, folded periodically to form an accordion-like
stack of corrugated material. As part of the transaction, WestRock acquired Plymouth’s equity interest in Panotec
and Plymouth’s exclusive right from Panotec to distribute Panotec’s equipment in the U.S. and Canada. We have
fully integrated the approximately 60,000 tons of containerboard used by Plymouth annually. We have included the
financial results of Plymouth in our Corrugated Packaging segment since the date of the acquisition.
See “Note 3. Acquisitions and Investment” of the Notes to Consolidated Financial Statements for additional
information. See also Item 1A. “Risk Factors — We May Be Unsuccessful in Making and Integrating Mergers,
Acquisitions and Investments, and Completing Divestitures”.
Business
(In millions)
Net sales
Segment income
Year Ended September 30,
2019
2018
$
$
18,289.0 $
1,790.2 $
16,285.1
1,707.6
In fiscal 2019, we continued to pursue our strategy of offering differentiated paper and packaging solutions that
help our customers win. We successfully executed this strategy in fiscal 2019 in a rapidly changing cost and price
environment. Net sales of $18,289.0 million for fiscal 2019 increased $2,003.9 million, or 12.3%, compared to fiscal
2018. The increase was primarily due to the KapStone Acquisition and higher selling price/mix in our Corrugated
Packaging and Consumer Packaging segments. These increases were partially offset by the absence of recycling
net sales in fiscal 2019 as a result of conducting the operations primarily as a procurement function beginning in
the first quarter of fiscal 2019, lower volumes, unfavorable foreign currency impacts across our segments
compared to the prior year and decreased Land and Development net sales.
Segment income increased $82.6 million in fiscal 2019 compared to fiscal 2018, primarily due to increased
Corrugated Packaging segment income that was partially offset by lower Consumer Packaging and Land and
Development segment income. The impact of the contribution from the acquired KapStone operations, higher
selling price/mix across our segments and productivity improvements was largely offset by lower volumes across
our segments, economic downtime, cost inflation, increased maintenance and scheduled strategic outage expense
(including projects at our Mahrt, AL and Covington, VA mills) and lower Land and Development segment income
due to the wind-down of sales. With respect to segment income, we experienced higher levels of cost inflation in
both our Corrugated Packaging and Consumer Packaging segments during fiscal 2019 as compared to fiscal 2018
that were partially offset by recovered fiber deflation. The primary inflationary items were virgin fiber, freight,
energy and wage and other costs.
We generated $2,310.2 million of net cash provided by operating activities in fiscal 2019, compared to
$1,931.2 million in fiscal 2018. We remained committed to our disciplined capital allocation strategy during fiscal
34
2019 by investing $1,369.1 million in capital expenditures, deployed $3,374.2 million to strategic acquisitions
(excluding the assumption of debt) while returning $467.9 million in dividends and $88.6 million to our stockholders
in share repurchases. In the nine months following December 2018, the quarter that included the KapStone
Acquisition, we reduced total debt $757.4 million. We believe our strong balance sheet and cash flow provide us
the flexibility to continue to invest to sustain and improve our operating performance. In fiscal 2020, we expect
capital expenditures to be approximately $1.1 billion. See “Liquidity and Capital Resources” for more
information.
A detailed review of our fiscal 2019 and 2018 performance appears below under “Results of Operations
(Consolidated)” and “Results of Operations — Segment Data”.
For fiscal 2020, we expect to generate net sales of between $18.0 billion and $18.5 billion. Our expectations
reflect the anticipated impact of the flow through of previously published price declines in North America
containerboard and kraft paper index pricing, as well as the full year impact of market pricing declines that we have
experienced in export containerboard and kraft paper, and market pulp. We expect that these declines will be
partially offset by the impact of an additional month of KapStone sales and growth in our corrugated box volumes in
North America and Brazil, as well as increased volumes in our Consumer Packaging segment.
We expect our earnings in fiscal 2020 to be impacted by the pricing declines noted above, as well as cost
inflation related to wages, benefits and other non-commodity categories. We expect to experience commodity cost
deflation, particularly related to recycled fiber. Similar to past years, we expect that slightly more of our earnings
will be generated in the second half of the fiscal year than in the first half of the fiscal year due to seasonality, the
timing of scheduled mill maintenance outages and our strategic capital projects.
In fiscal 2019, we announced plans to reconfigure our North Charleston, SC mill. The project, which we expect
to begin in the second quarter of fiscal 2020, is expected to reduce our linerboard capacity by approximately
288,000 tons and our annual costs by approximately $40 million, including a workforce reduction over a five-month
period.
We expect to invest approximately $1.1 billion in capital expenditures in fiscal 2020, including approximately
$275 million for our strategic capital projects at our Florence, SC and Tres Barras, Brazil mills. We expect to start
up the project at our Florence, SC mill in the spring of 2020 and to incur maintenance downtime during the first
quarter of fiscal 2020 in connection with this project.
35
Results of Operations (Consolidated)
The following table summarizes our consolidated results for the two years ended September 30, 2019:
(In millions)
Net sales
Cost of goods sold
Selling, general and administrative, excluding intangible
amortization
Selling, general and administrative intangible amortization
(Gain) loss on disposal of assets
Multiemployer pension withdrawal (income) expense
Land and Development impairments
Restructuring and other costs
Operating profit
Interest expense, net
Loss on extinguishment of debt
Pension and other postretirement non-service income
Other income, net
Equity in income of unconsolidated entities
Income before income taxes
Income tax (expense) benefit
Consolidated net income
Less: Net income attributable to noncontrolling interests
Net income attributable to common stockholders
Non-GAAP Financial Measures
Year Ended September 30,
2019
2018
$
18,289.0 $
14,540.0
16,285.1
12,923.1
1,715.2
400.2
(41.2)
(6.3)
13.0
173.7
1,494.4
(431.3)
(5.1)
74.2
2.4
10.1
1,144.7
(276.8)
867.9
(5.0)
862.9 $
1,546.6
296.6
10.1
184.2
31.9
105.4
1,187.2
(293.8)
(0.1)
95.3
12.7
33.5
1,034.8
874.5
1,909.3
(3.2)
1,906.1
$
We report our financial results in accordance with generally accepted accounting principles in the U.S.
(“GAAP”). However, we have included financial measures that were not prepared in accordance with GAAP. Non-
GAAP financial measures should be viewed in addition to, and not as an alternative for, our GAAP results. The
non-GAAP financial measures we present may differ from similarly captioned measures of other companies.
We use the non-GAAP financial measures “Adjusted Net Income” and “Adjusted Earnings Per Diluted Share”.
Management believes these non-GAAP financial measures provide our board of directors, investors, potential
investors, securities analysts and others with useful information to evaluate our performance because the
measures exclude restructuring and other costs and other specific items that management believes are not
indicative of the ongoing operating results of the business. We and our board of directors use this information to
evaluate our performance relative to other periods. We believe that the most directly comparable GAAP measures
to Adjusted Net Income and Adjusted Earnings Per Diluted Share are Net income attributable to common
stockholders and Earnings per diluted share, respectively.
Diluted earnings per share were $3.33 in fiscal 2019 compared to $7.34 in fiscal 2018. Adjusted Earnings Per
Diluted Share were $3.98 and $4.09 in fiscal 2019 and 2018, respectively.
Set forth below is a reconciliation of the non-GAAP financial measure Adjusted Earnings Per Diluted Share to
Earnings per diluted share, the most directly comparable GAAP measure (in dollars per share) for the periods
indicated.
36
Years Ended September 30,
2019
2018
Earnings per diluted share
Restructuring and other items
Accelerated depreciation on major capital projects and
certain plant closures
Inventory stepped-up in purchase accounting, net of LIFO
Losses at closed plants, transition and start-up costs
Land and Development impairment and operating results (1)
Impact of Tax Act, net of related tax planning
Loss on extinguishment of debt
Gain on sale of certain closed facilities
Direct expenses from Hurricane Michael, net of related
proceeds
Interest accretion and other
Brazil indirect tax
Multiemployer pension withdrawal (income) expense
Acquisition bridge and other financing fees
Consumer Packaging segment acquisition reserve adjustments
Gain on sale of waste services
Other
Adjusted Earnings Per Diluted Share
$
$
3.33 $
0.56
0.12
0.07
0.05
0.03
0.02
0.02
(0.15)
(0.03)
(0.02)
(0.02)
(0.01)
—
—
—
0.01
3.98 $
7.34
0.30
0.08
—
0.06
0.02
(4.22)
—
—
—
—
—
0.52
0.03
(0.06)
(0.03)
0.05
4.09
(1)
Includes a $13.0 million and $23.6 million impairment of mineral rights in fiscal 2019 and 2018, respectively.
The GAAP results in the tables below for Pre-Tax, Tax and Net of Tax are equivalent to the line items “Income
before income taxes”, “Income tax (expense) benefit” and “Consolidated net income”, respectively, as reported on
the statements of income. Set forth below are reconciliations of Adjusted Net Income to the most directly
comparable GAAP measure, Net income attributable to common stockholders (represented in the table below as
the GAAP Results for Consolidated net income (i.e. Net of Tax) plus Noncontrolling interests), for the periods
indicated (in millions):
GAAP Results
Restructuring and other items
Accelerated depreciation on major capital projects and certain
plant closures
Inventory stepped-up in purchase accounting, net of LIFO
Losses at closed plants, transition and start-up costs
Land and Development impairment and operating results (1)
Impact of Tax Act
Loss on extinguishment of debt
Gain on sale of certain closed facilities
Direct expenses from Hurricane Michael, net of related
proceeds
Interest accretion and other
Brazil indirect tax
Multiemployer pension withdrawal (income) expense
Other
Adjusted Results
Noncontrolling interests
Adjusted Net Income
37
Year ended September 30, 2019
Tax
Pre-Tax
$
1,144.7 $
173.7
Net of Tax
867.9
145.6
(276.8) $
(28.1)
42.1
24.7
19.7
10.5
—
5.1
(52.6)
(10.8)
(5.5)
(7.3)
(4.6)
3.9
1,343.6 $
$
(10.5)
(6.0)
(5.6)
(2.6)
4.1
(1.3)
12.9
2.6
1.3
2.1
1.2
(1.0)
(307.7) $
$
31.6
18.7
14.1
7.9
4.1
3.8
(39.7)
(8.2)
(4.2)
(5.2)
(3.4)
2.9
1,035.9
(5.0)
1,030.9
(1)
Includes a $13.0 million impairment of mineral rights in fiscal 2019.
Year ended September 30, 2018
Tax
Pre-Tax
$
GAAP Results
Restructuring and other items
Accelerated depreciation on major capital projects
Inventory stepped-up in purchase accounting, net of LIFO
Losses at closed plants and transition costs
Land and Development impairment and operating results (1)
Impact of Tax Act
Loss on extinguishment of debt
Multiemployer pension withdrawal expense
Acquisition bridge and other financing fees
Consumer Packaging segment acquisition reserve adjustments
Gain on sale of waste services
Other
Adjusted Results
Noncontrolling interests
Adjusted Net Income
$
1,034.8 $
105.4
27.0
1.0
19.4
6.9
—
0.1
183.3
12.0
(20.1)
(12.3)
13.7
1,371.2 $
874.5 $
(26.3)
(7.4)
(0.3)
(5.0)
(1.6)
(1,096.9)
—
(47.7)
(3.1)
5.2
4.4
(1.9)
(306.1) $
Net of Tax
1,909.3
79.1
19.6
0.7
14.4
5.3
(1,096.9)
0.1
135.6
8.9
(14.9)
(7.9)
11.8
1,065.1
(3.2)
1,061.9
$
(1)
Includes a $23.6 million impairment of mineral rights in fiscal 2018.
We discuss certain of these charges in more detail in “Note 4. Restructuring and Other Costs”, “Note 5.
Retirement Plans”, and “Note 6. Income Taxes”.
Net Sales (Unaffiliated Customers)
Net sales in fiscal 2019 increased $2,003.9 million, or 12.3%, compared to fiscal 2018. The increase was
primarily attributable to the KapStone Acquisition and higher selling price/mix in our Corrugated Packaging and
Consumer Packaging segments. These increases were partially offset by the absence of recycling net sales in
fiscal 2019 as a result of conducting the operations primarily as a procurement function beginning in the first
quarter of fiscal 2019, lower volumes and unfavorable foreign currency impacts across our segments compared to
the prior year. The change in net sales by segment is outlined below in “Results of Operations — Segment
Data”.
Cost of Goods Sold
Cost of goods sold increased to $14,540.0 million in fiscal 2019 compared to $12,923.1 million in fiscal 2018.
Cost of goods sold as a percentage of net sales was 79.5% in fiscal 2019 compared to 79.4% in fiscal 2018. The
increase in cost of goods sold in fiscal 2019 compared to fiscal 2018 was primarily due to increased net sales
associated with the impact of acquisitions (primarily the KapStone Acquisition), higher levels of cost inflation and
other items. These factors were partially offset by lower recovered fiber costs and productivity improvements. We
discuss these items in greater detail below. In fiscal 2019, we received $180.0 million of insurance proceeds
related to Hurricane Michael, primarily associated with our Panama City, FL mill that were recorded as a reduction
of cost of goods sold. See “Hurricane Michael” below for additional information. We discuss these items in greater
detail below in “Results of Operations — Segment Data”.
Selling, General and Administrative Excluding Intangible Amortization
Selling, general, and administrative expenses (“SG&A”) excluding intangible amortization increased $168.6
million to $1,715.2 million in fiscal 2019 compared to fiscal 2018 primarily due to the KapStone Acquisition. SG&A
excluding intangible amortization as a percentage of net sales declined in fiscal 2019 to 9.4% from 9.5% in fiscal
2018.
38
Selling, General and Administrative Intangible Amortization
SG&A intangible amortization was $400.2 million and $296.6 million in fiscal 2019 and 2018, respectively. The
increase in fiscal 2019 compared to fiscal 2018 was primarily due to the KapStone Acquisition.
(Gain) Loss on Disposal of Assets
The gain on disposal of assets in fiscal 2019 was $41.2 million and the loss on disposal of assets in fiscal 2018
was $10.1 million. The gain on disposal of assets in fiscal 2019 was primarily due to the $48.5 million gain on sale
of our former Atlanta beverage facility recorded in the first quarter of fiscal 2019.
Multiemployer Pension Withdrawal (Income) Expense
In the fiscal 2019, we recorded a $6.3 million reduction to a previously recorded MEPP withdrawal liabilities. In
fiscal 2018, we submitted formal notification to withdraw from PIUMPF and Central States and recorded aggregate
estimated withdrawal liabilities of $184.2 million, which includes an estimate of our portion of PIUMPF’s
accumulated funding deficiency. Since these withdrawal liabilities assume payment over 20 years, the liabilities
were discounted at a credit adjusted risk-free rate and, therefore, we will accrete the liability over time with a
charge to interest expense. See “Note 5. Retirement Plans — Multiemployer Plans” of the Notes to
Consolidated Financial Statements for additional information, including the receipt of demand letters from PIUMPF.
See also Item 1A. “Risk Factors — We May Incur Withdrawal Liability and/or Increased Funding
Requirements in Connection with MEPPs”.
Land and Development Impairments
In fiscal 2019, we recorded $13.0 million of pre-tax non-cash impairments of certain mineral rights following the
termination of a third party leasing relationship. In fiscal 2018, we recorded $31.9 million of pre-tax non-cash
impairments of certain mineral rights and real estate. The $23.6 million impairment of mineral rights in fiscal 2018
was driven by the non-renewal of a lease and associated with declining oil and gas prices, and the other $8.3
million was recorded to write-down the carrying value of certain real estate projects where the projected sales
proceeds were less than the carrying value. These charges are not reflected in segment income.
Restructuring and Other Costs
We recorded aggregate pre-tax restructuring and other costs of $173.7 million and $105.4 million for fiscal
2019 and 2018, respectively. We generally expect the integration of a closed facility’s assets and production with
other facilities to enable the receiving facilities to better leverage their fixed costs while eliminating fixed costs from
the closed facility. Costs recorded in each period are not comparable since the timing and scope of the individual
actions associated with each restructuring, acquisition, divestiture or integration vary. See “Note 4. Restructuring
and Other Costs” of the Notes to Consolidated Financial Statements for additional information, including a
description of the type of costs incurred. We have restructured portions of our operations from time to time and it is
likely that we will engage in additional restructuring opportunities in the future. See also Item 1A. “Risk Factors —
We May Incur Additional Restructuring Costs and May Not Realize Expected Benefits from Restructuring”.
Interest Expense, net
Interest expense, net was $431.3 million and $293.8 million for fiscal 2019 and 2018, respectively. Interest
expense, net in fiscal 2019 increased primarily due to debt incurred as a result of the KapStone Acquisition and
higher interest rates. Interest expense, net in fiscal 2019 and 2018 was reduced by $27.8 million and $31.0 million,
respectively, related to the amortization of the fair value of debt stepped-up in purchase accounting. See Item 1A.
“Risk Factors — The Level of Our Indebtedness Could Adversely Affect Our Financial Condition and Impair
Our Ability to Operate Our Business”.
Pension and Other Postretirement Non-Service Income
Pension and other postretirement non-service income was $74.2 million and $95.3 million in fiscal 2019 and
2018, respectively. Subsequent to the adoption of ASU 2017-07 (as hereinafter defined) we began presenting the
non-service components of our pension and other postretirement income (expense) separately from the service
39
cost components and outside the subtotal of operating profit. The decrease in fiscal 2019 was primarily due to the
decline in plan asset balances used to determine the expected return on plan assets.
Other Income, net
Other income, net was $2.4 million and $12.7 million in fiscal 2019 and 2018, respectively. Other income, net
in fiscal 2018 included a $12.3 million gain on the sale of our solid waste management brokerage services
business.
Provision for Income Taxes
We recorded income tax expense of $276.8 million for fiscal 2019 at an effective tax rate of 24.2% compared
to an income tax benefit of $874.5 million at an effective tax rate benefit of 84.5% in fiscal 2018, including a
$1,128.8 million provisional benefit from the Tax Act.
The effective tax rate for fiscal 2019 was higher than the statutory federal rate primarily due to (i) the inclusion
of state taxes, (ii) income derived from certain foreign jurisdictions subject to higher tax rates, (iii) the exclusion of
tax benefits related to losses recorded by certain foreign operations, (iv) the limitation of certain transaction costs
and (v) the increase of deferred tax liabilities in certain state jurisdictions, partially offset by (vi) the inclusion of tax
benefits related to share-based compensation and state tax law changes, (vii) research and development tax
credits and (viii) an adjustment of the valuation allowance against net operating losses of foreign subsidiaries.
The effective tax rate benefit for fiscal 2018 was lower than the statutory federal rate primarily due to (i) the
provisional amounts related to the enactment of the Tax Act, (ii) favorable tax items, such as the domestic
production deduction, tax benefit of share-based compensation and cash tax planning that resulted in reduced
deferred tax liabilities (iii) the true up of certain deferred taxes and foreign tax returns, and (iv) a change in
valuation allowance, partially offset by (v) the inclusion of state taxes and (vi) the exclusion of tax benefits related
to losses recorded by certain foreign operations.
See “Note 6. Income Taxes” of the Notes to Consolidated Financial Statements for additional information,
including the impact of the Tax Act.
Hurricane Michael
In October 2018, our containerboard and pulp mill located in Panama City, FL sustained extensive damage
from Hurricane Michael. We shut down the mill’s operations in advance of the hurricane’s landfall. Repair work was
completed during June 2019 on the two paper machines and related infrastructure and these paper machines are
now producing at normal production levels. Other repairs at the mill are continuing and all remaining repair work is
expected to be completed during fiscal 2020 and 2021. While we are still identifying the full cost associated with
the damage from Hurricane Michael, we anticipate the total of our property damage and business interruption
claim will exceed $200 million.
In fiscal 2019, we received $180.0 million of insurance proceeds (net of our $15 million deductible) that were
recorded as a reduction of cost of goods sold in our Corrugated Packaging segment related primarily to the
Panama City mill. The insurance proceeds consisted of $55.3 million for business interruption recoveries and
$124.7 million for direct costs and property damage. Our consolidated statements of cash flow in fiscal 2019
included $154.5 million in net cash provided by operating activities and $25.5 million net cash used for investing
activities. We expect to recover the majority of the additional amount of direct costs and lost production and sales
in future periods through insurance reimbursements.
Results of Operations — Segment Data
Corrugated Packaging Segment
North American Corrugated Packaging Shipments
Corrugated Packaging Shipments are expressed as a tons equivalent, which includes external and
intersegment tons shipped from our Corrugated Packaging mills plus Corrugated Packaging container shipments
converted from billion square feet (“BSF”) to tons. We have presented the Corrugated Packaging Shipments in two
40
groups: North American and Brazil / India because we believe investors, potential investors, securities analysts
and others find this breakout useful when evaluating our operating performance. We have included the impact of
the KapStone Acquisition beginning in the first quarter of fiscal 2019. The shipment data table excludes
merchandising displays since there is not a common unit of measure. The table below reflects shipments in
thousands of tons, BSF and millions of square feet (“MMSF”).
Fiscal 2018
North American Corrugated Packaging
Shipments - thousands of tons
North American Corrugated Containers
Shipments - BSF
North American Corrugated Containers Per
Shipping Day - MMSF
Fiscal 2019
North American Corrugated Packaging
Shipments - thousands of tons
North American Corrugated Containers
Shipments - BSF
North American Corrugated Containers Per
Shipping Day - MMSF
Brazil / India Corrugated Packaging Shipments
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Fiscal
Year
2,045.6 2,112.1 2,096.4 2,163.8 8,417.9
19.8
19.7
20.5
20.3
80.3
325.4
311.7
320.5
321.9
319.8
2,346.7 2,520.8 2,644.2 2,616.4 10,128.1
22.5
23.6
24.3
24.1
94.5
369.4
374.8
384.7
382.7
378.0
Fiscal 2018
Brazil / India Corrugated Packaging Shipments -
thousands of tons
170.5
174.6
178.6
196.7
720.4
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Fiscal
Year
Brazil / India Corrugated Containers Shipments
- BSF
Brazil / India Corrugated Containers Per Shipping
Day - MMSF
Fiscal 2019
Brazil / India Corrugated Packaging Shipments
1.6
1.5
1.6
1.6
6.3
21.7
20.6
20.2
21.0
20.9
- thousands of tons
185.6
176.5
171.0
194.6
727.7
Brazil / India Corrugated Containers Shipments
- BSF
Brazil / India Corrugated Containers Per
Shipping Day - MMSF
1.6
1.5
1.6
1.7
6.4
20.7
20.6
21.0
21.8
21.0
41
Corrugated Packaging Segment
(In millions, except percentages)
Fiscal 2018
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Fiscal 2019
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Net Sales (1)
Segment
Income
Return
on Sales
$
$
$
$
2,319.7 $
2,391.3
2,444.6
2,537.4
9,693.0 $
269.9
262.8
321.9
385.4
1,240.0
2,733.8 $
2,990.7
3,072.8
3,019.4
11,816.7 $
246.8
310.3
392.7
449.8
1,399.6
11.6%
11.0
13.2
15.2
12.8%
9.0%
10.4
12.8
14.9
11.8%
(1) Net Sales before intersegment eliminations
Net Sales (Aggregate) — Corrugated Packaging Segment
Net sales before intersegment elimination for the Corrugated Packaging segment increased $2,123.7 million in
the fiscal 2019 compared to fiscal 2018. The increase in net sales was primarily due to $2,851.5 million from
acquisitions, notably the KapStone Acquisition, and $203.5 million from higher corrugated selling price/mix as we
had higher selling prices for domestic containerboard and corrugated containers that were partially offset by
declining export prices. These increases were partially offset by the absence of $461.6 million of recycling net
sales in fiscal 2019 as a result of conducting the operations primarily as a procurement function beginning in the
first quarter of fiscal 2019, $417.7 million of lower volumes as lower containerboard volumes were partially offset
by increased corrugated container shipments and $65.4 million related to the impact of unfavorable foreign
currency.
Segment Income — Corrugated Packaging Segment
Segment income attributable to the Corrugated Packaging segment in fiscal 2019 increased $159.6 million
compared to fiscal 2018, primarily due to a $231.0 million of contribution from the acquired KapStone operations
before an estimated $23.1 million of economic downtime and net of a $24.7 million acquisition inventory step-up
charge, an estimated $122.8 million of productivity improvements and $118.8 million of higher corrugated selling
price/mix. These increases were partially offset by $126.5 million of lower volumes, unfavorable cost inflation of
$90.9 million, an estimated $66.4 million of economic downtime (including KapStone), $12.4 million of unfavorable
foreign currency impacts, and other costs. The net impact of cost inflation was unfavorable compared to the prior
year as lower recovered fiber costs were more than offset by higher wage and other costs, virgin fiber costs, freight
costs, energy costs and chemical costs. In fiscal 2019, Corrugated Packaging segment income included $11.3
million for a receivable established for the recovery of indirect taxes in Brazil. See “Note 18. Commitments and
Contingencies — Indirect Tax Claim” of the Notes to Consolidated Financial Statements for additional
information. Fiscal 2018 results were negatively affected by an estimated $20.7 million due to the impact of winter
weather and $19.0 million of start-up issues following a major maintenance outage at our Panama City, FL and
Tacoma, WA mills. Fiscal 2019 results included an estimated $7.7 million and $5.9 million of expense due to the
impact of Hurricane Dorian and start-up issues following a major maintenance outage, respectively. The full year
impact of Hurricane Michael, net of recoveries on Corrugated Packaging segment income was not significant.
42
Consumer Packaging Segment
Consumer Packaging Shipments
Consumer Packaging Shipments are expressed as a tons equivalent, which includes external and
intersegment tons shipped from our Consumer Packaging mills plus Consumer Packaging converting shipments
converted from BSF to tons. The fiscal 2018 shipment numbers below have been revised by an immaterial amount.
The shipment data table excludes gypsum paperboard liner tons produced by Seven Hills since it is not
consolidated.
Fiscal 2018
Consumer Packaging Shipments - thousands
of tons
Consumer Packaging Converting Shipments
- BSF
Consumer Packaging Converting Per Shipping
Day - MMSF
Fiscal 2019
Consumer Packaging Shipments - thousands
of tons
Consumer Packaging Converting Shipments
- BSF
Consumer Packaging Converting Per Shipping
Day - MMSF
Consumer Packaging Segment
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Fiscal
Year
977.0
986.1 1,017.9 1,024.1 4,005.1
10.6
10.6
10.9
11.1
43.2
174.2
167.2
171.6
174.8
171.9
969.6
985.5
980.1
974.0 3,909.2
10.5
11.0
11.1
11.1
43.7
172.7
174.3
176.0
175.9
174.7
(In millions, except percentages)
Net Sales (1)
Segment
Income
Return
on Sales
Fiscal 2018
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Fiscal 2019
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
$
$
$
$
1,601.3 $
1,637.3
1,669.6
1,709.3
6,617.5 $
1,618.8 $
1,668.3
1,650.1
1,668.8
6,606.0 $
94.2
94.6
126.1
130.2
445.1
76.9
85.2
91.0
135.0
388.1
5.9%
5.8
7.6
7.6
6.7%
4.8%
5.1
5.5
8.1
5.9%
(1) Net Sales before intersegment eliminations
Net Sales (Aggregate) — Consumer Packaging Segment
Net sales before intersegment eliminations for the Consumer Packaging segment decreased $11.5 million in
fiscal 2019 compared to the prior year primarily due to $128.3 million of higher selling price/mix and $32.0 million
from acquisitions, which were more than offset by $88.0 million of unfavorable foreign currency impacts and $83.7
million of lower volumes. Lower volumes were primarily driven by a decline in mill volumes that were partially offset
by a 3.7% increase in North American food and beverage tons shipped.
43
Segment Income — Consumer Packaging Segment
Segment income attributable to the Consumer Packaging segment in fiscal 2019 decreased $57.0 million
compared to the prior year. Segment income in the period was reduced by an estimated $112.5 million due to the
net impact of cost inflation compared to the prior year, an estimated $35.1 million of increased maintenance and
scheduled strategic outage expense (including the projects at the Mahrt, AL and Covington, VA mills), $44.5 million
due to the impact of lower volumes, $14.5 million of unfavorable foreign currency impacts, $5.6 million of higher
depreciation and amortization, and other items. These items were partially offset by an estimated $107.9 million of
higher selling price/mix and an estimated $84.9 million of productivity improvements. While the net impact of cost
inflation was unfavorable compared to the prior year, recovered fiber costs and chemical costs were lower than the
prior year but were more than offset by higher virgin fiber costs, freight costs and wage and other costs. Fiscal
2018 results were negatively affected by an estimated $17.2 million due to the impact of winter weather that was
more than offset by $20.1 million of favorable acquisition reserve adjustments.
Land and Development Segment
(In millions)
Fiscal 2018
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Fiscal 2019
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Net Sales (1)
Segment
Income (Loss)
$
$
$
$
11.4
26.7
64.8
39.5
142.4
13.9
0.8
8.6
0.1
23.4
$
$
$
$
(0.7)
16.1
9.9
(2.8)
22.5
0.7
0.5
1.6
(0.3)
2.5
(1) Net sales before intersegment eliminations
Net Sales (Aggregate) — Land and Development Segment
Net sales for the Land and Development segment in fiscal 2019 and 2018 were $23.4 million and $142.4
million, respectively. The decrease in fiscal 2019 was due to the wind-down of sales. We include the remainder of
the real estate holdings in assets held for sale because we have met the held for sale criteria.
Segment Income (Loss) — Land and Development Segment
Segment income attributable to the Land and Development segment was $2.5 million and $22.5 million in
fiscal 2019 and 2018, respectively. The pre-tax non-cash impairments of certain mineral rights and real estate
discussed above under the caption “Land and Development Impairments” are not included in segment income.
Liquidity and Capital Resources
We fund our working capital requirements, capital expenditures, mergers, acquisitions and investments,
restructuring activities, dividends and stock repurchases from net cash provided by operating activities, borrowings
under our credit facilities, proceeds from our A/R Sales Agreement (as hereinafter defined), proceeds from the sale
of property, plant and equipment removed from service and proceeds received in connection with the issuance of
debt and equity securities. See “Note 13. Debt” of the Notes to Consolidated Financial Statements for additional
information. Funding for our domestic operations in the foreseeable future is expected to come from sources of
liquidity within our domestic operations, including cash and cash equivalents, and available borrowings under our
44
credit facilities. As such, our foreign cash and cash equivalents are not expected to be a key source of liquidity to
our domestic operations.
At September 30, 2019, we had approximately $2.9 billion of availability under our committed credit facilities,
primarily under our revolving credit facility, the majority of which matures on July 1, 2022. This liquidity may be
used to provide for ongoing working capital needs and for other general corporate purposes, including acquisitions,
dividends and stock repurchases.
Certain restrictive covenants govern our maximum availability under the credit facilities. We test and report our
compliance with these covenants as required and we were in compliance with all of these covenants at
September 30, 2019. At September 30, 2019, we had $129.8 million of outstanding letters of credit not drawn
upon.
Cash and cash equivalents were $151.6 million at September 30, 2019 and $636.8 million at September 30,
2018. We used a significant portion of the cash and cash equivalents on hand at September 30, 2018 in
connection with the closing of the KapStone Acquisition. Primarily all of the cash and cash equivalents at
September 30, 2019 were held outside of the U.S. At September 30, 2019, total debt was $10,063.4 million,
$561.1 million of which was current. At September 30, 2018, total debt was $6,415.2 million, $740.7 million of
which was current. The increase in debt was primarily related to the KapStone Acquisition.
Cash Flow Activity
(In millions)
Net cash provided by operating activities
Net cash used for investing activities
Net cash provided by (used for) financing activities
Year Ended September 30,
2019
2018
$
$
$
2,310.2 $
(4,579.6) $
1,780.2 $
1,931.2
(815.1)
(755.1)
Net cash provided by operating activities during fiscal 2019 increased $379.0 million from fiscal 2018 primarily
due to higher cash earnings and a $340.3 million net decrease in the use of working capital compared to the prior
year. As a result of the retrospective adoption of ASU 2016-15 and ASU 2016-18 (each as hereinafter defined) as
discussed in “Note 1. Description of Business and Summary of Significant Accounting Policies” of the Notes
to Consolidated Financial Statements, net cash provided by operating activities for fiscal 2018 was reduced by
$489.7 million and cash provided by investing activities increased $483.8 million, primarily for the change in
classification of proceeds received for beneficial interests obtained for transferring trade receivables in
securitization transactions.
Net cash used for investing activities of $4,579.6 million in fiscal 2019 consisted primarily of $3,374.2 million
for cash paid for the purchase of businesses, net of cash acquired (excluding the assumption of debt), primarily
related to the KapStone Acquisition, and $1,369.1 million for capital expenditures that were partially offset by
$119.1 million of proceeds from the sale of property, plant and equipment primarily related to the sale of our Atlanta
beverage facility, $33.2 million of proceeds from corporate owned life insurance benefits and $25.5 million of
proceeds from property, plant and equipment insurance proceeds related to the Panama City, FL mill. Net cash
used for investing activities of $815.1 million in fiscal 2018 consisted primarily of $999.9 million for capital
expenditures, $239.9 million for cash paid for the purchase of businesses, net of cash acquired primarily related to
the Plymouth Acquisition and the Schlüter Acquisition, and $108.0 million for an investment in Grupo Gondi. These
investments were partially offset by $461.6 million of cash receipts on sold trade receivables as a result of the
adoption of ASU 2016-15, $24.0 million of proceeds from the sale of certain affiliates as well as our solid waste
management brokerage services business and $23.3 million of proceeds from the sale of property, plant and
equipment.
In fiscal 2019, net cash provided by financing activities of $1,780.2 million consisted primarily of a net increase
in debt of $2,314.6 million, primarily related to the KapStone Acquisition and partially offset by cash dividends paid
to stockholders of $467.9 million and purchases of Common Stock of $88.6 million. In fiscal 2018, net cash used
for financing activities of $755.1 million consisted primarily of cash dividends paid to stockholders of $440.9 million
and purchases of Common Stock of $195.1 million and net repayments of debt of $120.1 million.
45
Our capital expenditures aggregated $1,369.1 million in fiscal 2019. We expect fiscal 2020 capital
expenditures to be approximately $1.1 billion, including approximately $275 million for our strategic capital projects
at our Florence, SC and Tres Barras, Brazil mills. We expect to start up the project at our Florence mill in the spring
of 2020 and the Tres Barras project in the first half of calendar 2021. With the completion of certain of our strategic
capital projects in fiscal 2019 and 2020, we expect to transition to our long-range capital expenditure run rate of
approximately $900 million to $1.0 billion a year in fiscal 2021. We generally expect our base capital expenditures
to be roughly half invested in maintenance and half invested in high return generating projects. However, it is
possible that our capital expenditure assumptions may change, project completion dates may change, or we may
decide to invest a different amount depending upon opportunities we identify, or changes in market conditions, or
to comply with environmental or other regulatory changes.
We estimate that we will invest approximately $15 million for capital expenditures during fiscal 2020 in
connection with matters relating to environmental compliance. We were obligated to purchase approximately $623
million of fixed assets at September 30, 2019 for various capital projects. See Item 1A. “Risk Factors — Our
Capital Expenditures May Not Achieve the Desired Outcomes or May Be Achieved at a Higher Cost than
Anticipated”.
At September 30, 2019, the U.S. federal, state and foreign net operating losses and state tax credits available
to us aggregated approximately $83 million in future potential reductions of U.S. federal, state and foreign cash
taxes. Based on our current projections, we expect to utilize the remaining U.S. federal net operating losses over
the next two years. Foreign and state net operating losses and credits will be used over a longer period of time. It is
possible that our utilization of these net operating losses and credits may change due to changes in taxable
income, tax laws or tax rates, capital expenditures or other factors. Including the estimated impact of book and tax
differences, subject to changes in tax laws, we expect our cash tax rate to move closer to our income tax rate in
fiscal 2020, 2021 and 2022.
During fiscal 2019 and 2018, we made contributions of $25.0 million and $37.7 million, respectively, to our U.S.
and non-U.S. pension plans. Based on current facts and assumptions, we expect to contribute approximately $27
million to our U.S. and non-U.S. pension plans in fiscal 2020. We have made contributions and expect to continue
to make contributions in the coming years to our pension plans in order to ensure that our funding levels remain
adequate in light of projected liabilities and to meet the requirements of the Pension Act and other regulations. The
net underfunded status of our U.S. and non-U.S. pension plans at September 30, 2019 was $85.8 million. Based
on current assumptions, including future interest rates, we estimate that minimum pension contributions to our U.S.
and non-U.S. pension plans will be in the range of approximately $24 million to $28 million annually in fiscal 2021
through 2024. See “Note 5. Retirement Plans” of the Notes to Consolidated Financial Statements. See also Item
1A. “Risk Factors —Our Pension Plans Will Likely Require Additional Cash Contributions”.
In the normal course of business, we evaluate our potential exposure to MEPPs, including with respect to
potential withdrawal liabilities. In fiscal 2018, we submitted formal notification to withdraw from two plans and
recorded an aggregate estimated withdrawal liability of $184.2 million, nearly all of which was for PIUMPF. In
September 2019, we received a demand from PIUMPF asserting that we owe $170.3 million on an undiscounted
basis (approximately $0.7 million per month for the next 20 years) with respect to our withdrawal liability. The
demand did not address any assertion of liability for PIUMPF’s accumulated funding deficiency. In October 2019,
we received two additional demand letters from PIUMPF related to a subsidiary asserting that we owe $2.3 million
on an undiscounted basis to be paid over 20 years with respect to the subsidiary’s withdrawal liability and $2.0
million for its accumulated funding deficiency. We are evaluating each of these demands. We expect to challenge
the accumulated funding deficiency. We expect to begin making monthly payments for these withdrawal liabilities
in fiscal 2020. See “Note 5. Retirement Plans — Multiemployer Plans” of the Notes to Consolidated Financial
Statements for additional information. See also Item 1A. “Risk Factors — We May Incur Withdrawal Liability
and/or Increased Funding Requirements in Connection with MEPPs”.
In November 2019, our board of directors declared a quarterly dividend of $0.465 per share, representing a
2.2% increase from the prior $0.455 per share quarterly dividend and an annual dividend of $1.86 per share.
During fiscal 2019 and 2018, we paid an annual dividend of $1.82 per share and $1.72 per share, respectively.
In July 2015, our board of directors authorized a repurchase program of up to 40.0 million shares of our
Common Stock, representing approximately 15% of our outstanding Common Stock as of July 1, 2015. Shares of
our Common Stock may be purchased from time to time in open market or privately negotiated transactions. The
timing, manner, price and amount of repurchases will be determined by management at its discretion based on
46
factors, including the market price of our Common Stock, general economic and market conditions and applicable
legal requirements. The repurchase program may be commenced, suspended or discontinued at any time. In fiscal
2019, we repurchased approximately 2.1 million shares of our Common Stock for an aggregate cost of $88.6
million. In fiscal 2018, we repurchased approximately 3.4 million shares of our Common Stock for an aggregate
cost of $195.1 million. As of September 30, 2019, we had approximately 19.1 million shares of Common Stock
available for repurchase under the program.
We anticipate that we will be able to fund our capital expenditures, interest payments, dividends and stock
repurchases, pension payments, working capital needs, note repurchases, restructuring activities, repayments of
current portion of long-term debt and other corporate actions for the foreseeable future from cash generated from
operations, borrowings under our credit facilities, proceeds from our A/R Sales Agreement, proceeds from the
issuance of debt or equity securities or other additional long-term debt financing, including new or amended
facilities. In addition, we continually review our capital structure and conditions in the private and public debt
markets in order to optimize our mix of indebtedness. In connection with these reviews, we may seek to refinance
existing indebtedness to extend maturities, reduce borrowing costs or otherwise improve the terms and
composition of our indebtedness.
Contractual Obligations
We summarize our enforceable and legally binding contractual obligations at September 30, 2019, and the
effect these obligations are expected to have on our liquidity and cash flow in future periods in the following table.
Certain amounts in this table are based on management’s estimates and assumptions about these obligations,
including their duration, the possibility of renewal, anticipated actions by third parties and other factors, including
estimated minimum pension plan contributions and estimated benefit payments related to postretirement
obligations, supplemental retirement plans and deferred compensation plans. Because these estimates and
assumptions are subjective, the enforceable and legally binding obligations we actually pay in future periods may
vary from those presented in the table.
(In millions)
Total
and 2022
and 2024 Thereafter
Payments Due by Period
Fiscal
2021
Fiscal
2023
Fiscal
2020
Long-Term Debt, including current portion,
excluding capital lease obligations (1)
Operating lease obligations
Capital lease obligations (3)
Purchase obligations and other (4) (5) (6)
Total
(2)
$ 9,714.1 $
930.4
168.9
939.8 $ 2,494.3 $ 5,729.2
550.8 $
206.1
193.6
316.4
214.3
150.9
2.9
8.7
6.4
2,293.5 1,607.0
187.3
206.7
292.5
$13,106.9 $ 2,378.5 $ 1,557.4 $ 2,897.5 $ 6,273.5
(1)
Includes only principal payments owed on our debt assuming that all of our long-term debt will be held to maturity,
excluding scheduled payments. We have excluded $163.5 million of fair value of debt step-up, deferred financing costs and
unamortized bond discounts from the table to arrive at actual debt obligations. See “Note 13. Debt” of the Notes to
Consolidated Financial Statements for information on the interest rates that apply to our various debt instruments.
(2) See “Note 15. Operating Leases” of the Notes to Consolidated Financial Statements for additional information.
(3) The fair value step-up of $16.9 million is excluded. See “Note 13. Debt — Capital Lease and Other Indebtedness” of the
Notes to Consolidated Financial Statements for additional information.
(4) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding and that
specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price
provision; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable
without penalty.
(5) We have included in the table future estimated minimum pension plan contributions and estimated benefit payments
related to postretirement obligations, supplemental retirement plans and deferred compensation plans. Our estimates are
based on factors, such as discount rates and expected returns on plan assets. Future contributions are subject to changes
in our underfunded status based on factors such as investment performance, discount rates, returns on plan assets and
changes in legislation. It is possible that our assumptions may change, actual market performance may vary or we may
decide to contribute different amounts. We have excluded $237.2 million of multiemployer pension plan withdrawal
liabilities recorded as of September 30, 2019, including our estimate of the accumulated funding deficiency, due to lack of
47
definite payout terms for certain of the obligations. See “Note 5. Retirement Plans – Multiemployer Plans” of the Notes to
Consolidated Financial Statements for additional information.
(6) We have not included the following items in the table:
•
•
An item labeled “other long-term liabilities” reflected on our consolidated balance sheet because these liabilities do not
have a definite pay-out scheme.
$284.7 million for certain provisions of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards
Codification (“ASC”) 740, “Income Taxes” associated with liabilities for uncertain tax positions due to the uncertainty
as to the amount and timing of payment, if any.
In addition to the enforceable and legally binding obligations presented in the table above, we have other
obligations for goods and services and raw materials entered into in the normal course of business. These
contracts, however, are subject to change based on our business decisions.
Expenditures for Environmental Compliance
See Item 1. “Business — Governmental Regulation — Environmental and Other Matters”, “Business —
Governmental Regulation — CERCLA and Other Remediation Costs”, and “Business — Governmental
Regulation — Climate Change” for a discussion of our expenditures for environmental compliance.
Critical Accounting Policies and Estimates
We have prepared our accompanying consolidated financial statements in conformity with GAAP, which
requires management to make estimates that affect the amounts of revenues, expenses, assets and liabilities
reported. Certain significant accounting policies are described in “Note 1. Description of Business and
Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements. See also
Item 7A. “Quantitative and Qualitative Disclosures About Market Risk”.
These critical accounting policies are both important to the portrayal of our financial condition and results of
operations and require some of management’s most subjective and complex judgments. The accounting for these
matters involves the making of estimates based on current facts, circumstances and assumptions that, in
management’s judgment, could change in a manner that would materially affect management’s future estimates
with respect to such matters and, accordingly, could cause our future reported financial condition and results of
operations to differ materially from those that we are currently reporting based on management’s current
estimates.
Goodwill
We review the carrying value of our goodwill annually at the beginning of the fourth quarter of each fiscal year,
or more often if events or changes in circumstances indicate that the carrying amount may exceed fair value. We
determine recoverability by comparing the estimated fair value of the reporting unit to which the goodwill applies to
the carrying value, including goodwill, of that reporting unit. We determine the fair value of each reporting unit using
the discounted cash flow method or, as appropriate, a combination of the discounted cash flow method and the
guideline public company method. Our discounted cash flow analysis is based on the sum of two components, the
present value of our projected cash flows and the present value of a terminal value. The cash flow estimates are
derived from our current forecast and our long-term forecasts prepared for each reporting unit considering
historical results and anticipated future performance and capital expenditures, and require considerable judgment.
The discount rates used to determine the present value of future cash flows are derived from a weighted average
cost of capital analysis utilizing a beta derived from peer companies. In addition, we give consideration in the
calculation of the weighted average cost of capital for equity risks, including size risk, industry risk and country
specific risk, as appropriate, for each of our reporting units. The guideline public company method involves
comparing the reporting unit to similar companies whose stock is freely traded on an organized exchange. The fair
values determined by the discounted cash flow and guideline public company methods were weighted to arrive at
the concluded fair value of the reporting unit. However, in instances where comparisons to our peers was less
meaningful, no weight was placed on the guideline public company method to arrive at the concluded fair value of
the reporting unit.
Estimating the fair value of the reporting unit involves uncertainties because it requires management to
develop numerous assumptions, including assumptions about the future growth and potential volatility in revenues
48
and costs, capital expenditures, industry economic factors and future business strategy. The variability of the
factors that management uses to perform the goodwill impairment test depends on a number of conditions,
including uncertainty about future events and cash flows, including anticipated changes in revenues and costs and
synergies and productivity improvements resulting from the acquisitions, capital expenditures and continuous
improvement projects. These factors are interdependent and, therefore, do not change in isolation. Accordingly,
our accounting estimates may materially change from period to period due to changing market factors. If we had
used other assumptions and estimates or if conditions change in future periods, our operating results could be
materially impacted. Any significant adverse changes in key assumptions about these reporting units and their
prospects, such as changes in our strategy or products, the loss of key customers, regulatory changes or adverse
changes in economic and market conditions may cause a change in the estimated fair values of our reporting units
and could result in an impairment charge that could be material to our financial statements.
During the third quarter of fiscal 2019, we tested our goodwill for potential impairment on an interim basis due
to changing market conditions, including the impact on the trading price of our Common Stock. All reporting units
that have goodwill were noted to have a fair value that exceeded their carrying values as of the interim impairment
test date. The discount rate used for each reporting unit ranged from 8.5% to 14.0%. We used perpetual growth
rates in the reporting units that have goodwill ranging from 0.0% to 1.0%. Our Consumer Packaging and Victory
Packaging reporting units had fair values that exceeded their respective carrying values by less than 10% each,
primarily due to the fair value accounting related to the Combination and the MPS Acquisition (for Consumer
Packaging) and the KapStone Acquisition (for Victory Packaging). If we had concluded that it was appropriate to
increase the discount rate we used by 100 basis points to estimate the fair value of each reporting unit that has
goodwill, the fair value of each of our reporting units would have continued to exceed its carrying value, except for
the Consumer Packaging reporting unit. The Consumer Packaging and Victory Packaging reporting units had
$3,590.6 million and $40.2 million of goodwill, respectively, at September 30, 2019. We reviewed the carrying
value of our goodwill at the beginning of the fourth quarter and continually monitored industry economic trends until
the end of our fiscal year and determined no additional testing for goodwill impairment was warranted. We have not
made any material changes to our impairment loss assessment methodology during the past three fiscal years.
Currently, we do not believe there is a reasonable likelihood that there will be a material change in future
assumptions or estimates we use to calculate impairment losses. However, if actual results are not consistent with
our assumptions and estimates, we may be exposed to impairment losses that could be material.
See Item 1A. “Risk Factors — We Have a Significant Amount of Goodwill and Other Intangible Assets
and a Write-Down Would Adversely Impact Our Operating Results and Shareholders’ Equity”.
Accounting for Income Taxes
Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits, reflect
management’s best assessment of estimated current and future taxes to be paid. Significant judgments and
estimates are required in determining the consolidated income tax expense. In evaluating our ability to recover our
deferred tax assets within the jurisdiction from which they arise we consider all available positive and negative
evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax
planning strategies, recent financial operations and their associated valuation allowances, if any. We use
significant judgment in (i) determining whether a tax position, based solely on its technical merits, is more likely
than not to be sustained upon examination, and (ii) measuring the tax benefit as the largest amount of benefit that
is more likely than not to be realized upon ultimate settlement. We do not record any benefit for the tax positions
where we do not meet the more likely than not initial recognition threshold. Income tax positions must meet a more
likely than not recognition threshold at the effective date to be recognized. We generally recognize interest and
penalties related to unrecognized tax benefits in income tax expense in the consolidated statements of income.
Resolution of the uncertain tax positions could have a material adverse effect on our cash flows or materially
benefit our results of operations in future periods depending upon their ultimate resolution. A 1% change in our
effective tax rate would increase or decrease tax expense by approximately $11.4 million for fiscal 2019. A 1%
change in our effective tax rate used to compute deferred tax liabilities and assets, as recorded on the
September 30, 2019 consolidated balance sheet, would increase or decrease tax expense by approximately
$121.3 million for fiscal 2019.
Business Combinations
From time to time, we may enter into business combinations. In accordance with ASC 805, “Business
Combinations”, we generally recognize the identifiable assets acquired, the liabilities assumed and any
49
noncontrolling interests in an acquiree at their fair values as of the date of acquisition. We measure goodwill as the
excess of consideration transferred, which we also measure at fair value, over the net of the acquisition date fair
values of the identifiable assets acquired and liabilities assumed. The acquisition method of accounting requires us
to make significant estimates and assumptions regarding the fair values of the elements of a business combination
as of the date of acquisition, including the fair values of identifiable intangible assets, deferred tax asset valuation
allowances, liabilities including those related to debt, pensions and other postretirement plans, uncertain tax
positions, contingent consideration and contingencies. Significant estimates and assumptions include subjective
and/or complex judgements regarding items such as discount rates, customer attrition rates, economic lives and
other factors, including estimating future cash flows that we expect to generate from the acquired assets.
The acquisition method of accounting also requires us to refine these estimates over a measurement period
not to exceed one year to reflect new information obtained about facts and circumstances that existed as of the
acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. If
we are required to adjust provisional amounts that we have recorded for the fair values of assets and liabilities in
connection with acquisitions, these adjustments could have a material impact on our financial condition and results
of operations. No changes in fiscal 2019 to our fiscal 2018 provisional fair value estimates of assets and liabilities
assumed in acquisitions have been significant. If the subsequent actual results and updated projections of the
underlying business activity change compared with the assumptions and projections used to develop these values,
we could record future impairment charges. In addition, we have estimated the economic lives of certain acquired
assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the
economic lives change, depreciation or amortization expenses could be increased or decreased, or the acquired
asset could be impaired.
Pension
The funded status of our qualified and non-qualified U.S. and non-U.S. pension plans decreased $233.5
million in fiscal 2019. Our U.S. qualified and non-qualified pension plans and non-U.S. pension plans were under
funded by $43.6 million and $42.2 million, respectively, as of September 30, 2019. Our U.S. pension plan benefit
obligations were negatively impacted in fiscal 2019 primarily by a 115-basis point decrease in the discount rate
compared to the prior measurement date. The non-U.S. pension plan obligations were negatively impacted in fiscal
2019 by a 100-basis point decrease in the discount rate compared to the prior measurement date. A 25-basis point
change in the discount rate, compensation level and expected long-term rate of return on plan assets, factoring in
our corridor as appropriate, would have had the following effect on fiscal 2019 pension expense (amounts in the
table in parentheses reflect additional income, in millions):
Discount rate
Compensation level
Expected long-term rate of return on plan assets
New Accounting Standards
Pension Plans
25 Basis
Point
Increase
$
$
$
(10.2) $
0.3 $
(14.2) $
25 Basis
Point
Decrease
10.4
(0.3)
14.2
See “Note 1. Description of Business and Summary of Significant Accounting Policies” of the Notes to
Consolidated Financial Statements for a full description of recent accounting pronouncements, including the
respective expected dates of adoption and expected effects on our results of operations and financial condition.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in, among other things, interest rates, foreign currencies and
commodity prices. We aim to identify and understand these risks and then implement strategies to manage them.
When evaluating these strategies, we evaluate the fundamentals of each market, our sensitivity to movements in
pricing, and underlying accounting and business implications. To implement these strategies, we may enter into
various hedging transactions. The sensitivity analyses we present below do not consider the effect of possible
50
adverse changes in the general economy, nor do they consider additional actions we may take to mitigate our
exposure to such changes. We may not be successful in managing these risks.
Containerboard and Paperboard Shipments
We are exposed to market risk related to our sales of containerboard and paperboard. We sell a significant
portion of our mill production and converted products pursuant to contracts that provide that prices are either fixed
for specified terms or provide for price adjustments based on negotiated terms, including changes in specified
index prices. We have the capacity to annually ship approximately 11.8 million tons in our Corrugated Packaging
segment and approximately 4.2 million tons in our Consumer Packaging segment. Although our mill system
operating rates may vary from year to year due to changes in market and other factors, our simple average mill
system operating rates for the last three years averaged 94%. A hypothetical $10 per ton decrease in the price of
containerboard and paperboard throughout the year based on our capacity would decrease our sales by
approximately $118 million and $42 million in our Corrugated Packaging and Consumer Packaging segments,
respectively. See Item 1A. “Risk Factors — Our Earnings Are Highly Dependent on Volumes”.
Energy
Energy is one of the most significant costs of our mill operations. The cost of natural gas, coal, oil, electricity,
diesel and wood by-products (biomass) at times have fluctuated significantly. In our recycled paperboard mills, we
use primarily natural gas and electricity, supplemented with coal and fuel oil to generate steam used in the paper
making process and, at a few mills, to generate electricity used on site. In our virgin fiber mills, we use biomass,
natural gas and coal to generate steam used in the pulping and paper making processes and to generate some or
all of the electricity used on site. We primarily use electricity and natural gas to operate our converting facilities. We
generally purchase these products from suppliers at market or tariff rates. We may from time to time use
commodity contracts to hedge energy exposures.
We spent approximately $879 million on all energy sources in fiscal 2019 to operate our facilities. Natural gas
and electricity each accounted for approximately a third of our total energy purchases in fiscal 2019. While the
amount of energy we consume my vary from year to year due to production levels and other factors, in fiscal 2020
we expect to consume approximately 84 million MMBtu of natural gas. A hypothetical 10% increase in the price of
energy throughout the year would increase our cost of energy by approximately $88 million based on fiscal 2019
pricing and consumption.
Recycled Fiber
Recycled fiber is the principal raw material we use in the production of recycled paperboard and a portion of
our containerboard. We consume approximately 5.6 million tons of recycled fiber per year. Recycled fiber prices
can fluctuate significantly. Our purchases of old corrugated containers and double-lined kraft clippings accounted
for our largest recycled fiber costs and approximately 85% to 90% of our recycled fiber purchases. The remaining
10% to 15% of our recycled fiber purchases consisted of a number of other grades of recycled paper. The mix of
recycled fiber may vary due to factors such as market demand, availability and pricing. A hypothetical 10%
increase in recycled fiber prices in our mills for a fiscal year would increase our costs by approximately $61 million.
Virgin Fiber
Virgin fiber is the principal raw material we use in the production of a portion of our containerboard, bleached
paperboard and market pulp. While virgin fiber prices have generally been more stable than recycled fiber prices,
they also fluctuate, particularly due to significant changes in weather, such as during prolonged periods of heavy
rain or drought, or during housing construction slowdowns or accelerations. A hypothetical 10% increase in virgin
fiber prices in our mills for a fiscal year would increase our costs by approximately $151 million.
Freight
Inbound and outbound freight is a significant expenditure for us. Factors that influence our freight expense are
items such as distance between our shipping and delivery locations, distance from customers and suppliers, mode
of transportation (rail, truck, intermodal and ocean) and freight rates, which are influenced by supply and demand
and fuel costs, primarily diesel. We experienced significantly higher freight costs in fiscal 2019, as transportation
companies raised prices to address a shortage of drivers and strong demand. A hypothetical 10% increase for a
51
fiscal year would increase our costs by approximately $165 million, of which nearly one-fifth would be the portion
related to higher diesel costs based on our estimated 82 million gallons consumed annually. See Item 1A. “Risk
Factors — We May Face Increased Costs For, or Inadequate Availability of, Raw Materials, Energy and
Transportation”.
Interest Rates
We are exposed to changes in interest rates, primarily as a result of our short-term and long-term debt. As
discussed below, we may from time to time use interest rate swap agreements to manage the interest rate
characteristics of a portion of our outstanding debt. Based on the amounts and mix of our fixed and floating rate
debt at September 30, 2019, including the impact of our interest rate swaps, if market interest rates increase an
average of 100 basis points, our annual interest expense would increase by approximately $25 million. We
determined these amounts by considering the impact of the hypothetical interest rates on our borrowing costs. This
analysis does not consider the effects of changes in the level of overall economic activity that could exist in such an
environment. See Item 1A. “Risk Factors — The Level of Our Indebtedness Could Adversely Affect Our
Financial Condition and Impair Our Ability to Operate Our Business”.
Derivative Instruments / Forward Contracts
We periodically may issue and settle foreign currency denominated debt, exposing us to the effect of changes
in spot exchange rates between loan issue and loan repayment dates and changes in spot exchange rates on
open balances at each balance sheet date. From time to time, we may use foreign exchange contracts to hedge
these exposures with terms of generally one month. Based on our open foreign exchange contracts as of
September 30, 2019, the effect of a 1% change in exchange rates would impact other income, net by
approximately $4 million. Although these foreign currency sensitive instruments expose us to market risk,
fluctuations in the value of these instruments are mitigated by expected offsetting fluctuations in the foreign
currency denominated debt exposures. The fluctuation of these instruments may cause future cash settlement of
the hedge.
We periodically may also enter into interest rate swaps to manage the interest rate risk associated with a
portion of our outstanding debt. Interest rate swaps are either designated for accounting purposes as cash flow
hedges of forecasted floating interest payments on variable rate debt or fair value hedges of fixed rate debt, or we
may elect not to treat them as accounting hedges. Based on our open interest rate swaps as of September 30,
2019, the effect of a 1% change in interest rates would impact interest expense by approximately $6 million. We
may enter into swaps or forward contracts on certain commodities to manage the price risk associated with
forecasted purchases or sales of those commodities. Based on our open natural gas contracts as of September
30, 2019, the effect of a 1% change in prices would impact cost of goods sold by less than $1 million.
Pension Plans
Our pension plans are influenced by trends in the financial markets and the regulatory environment, among
other factors. Adverse general stock market trends and falling interest rates increase plan costs and liabilities.
During fiscal 2019 and 2018, the effect of a 0.25% decrease in the discount rate would have reduced pre-tax
income by approximately $10 million and $11 million, respectively, and a 0.25% increase in the discount rate would
have increased pre-tax income by $10 million and $11 million, respectively. Similarly, MEPPs in which we
participate could experience similar circumstances which could impact our funding requirements and therefore
expenses. See “Note 5. Retirement Plans — Multiemployer Plans” of the Notes to Consolidated Financial
Statements. See also Item 1A. “Risk Factors —Our Pension Plans Will Likely Require Additional Cash
Contributions” and “Risk Factors — We May Incur Withdrawal Liability and/or Increased Funding
Requirements in Connection with MEPPs”.
Foreign Currency
We predominately operate in U.S. markets, but derived 18.2% of our net sales in fiscal 2019 from outside the
U.S. through international operations, some of which were transacted in U.S. dollars. In addition, certain of our
domestic operations have sales to foreign customers. Although we are impacted by the exchange rates of a
number of currencies, our largest exposures are generally to the Brazilian Real, British Pound, Canadian dollar,
Euro and Mexican Peso. In conducting our foreign operations, we also make inter-company sales and receive
royalties and dividends denominated in different currencies. These activities expose us to the effect of changes in
52
foreign currency exchange rates. Flows of foreign currencies into and out of our operations are generally stable
and regularly occurring and are recorded at fair market value in our financial statements. Our foreign currency
management policy permits us to enter into foreign currency hedges when these flows exceed a threshold, which
is a function of these cash flows and forecasted annual operations.
At times, certain of our foreign subsidiaries have U.S. dollar-denominated external debt. In these instances, we
may hedge the non-functional currency exposure with derivatives. We issue inter-company loans to and receive
foreign cash deposits from our foreign subsidiaries in their local currencies, exposing us to the effect of changes in
spot exchange rates between loan issue and loan repayment dates and changes in spot exchange rates from
deposits. From time to time, we may use foreign-exchange hedge contracts with terms of generally less than one
year to hedge these exposures. Although our derivative and other foreign currency sensitive instruments expose
us to market risk, fluctuations in the value of these instruments are mitigated by expected offsetting fluctuations in
the matched exposures.
During fiscal 2019 and 2018, the effect of a hypothetical 10% change in foreign currencies that we have
exposure to versus to the U.S. dollar would have impacted our segment results by approximately $39 million and
$36 million, respectively. See “Note 7. Segment Information” of the Notes to Consolidated Financial Statements
for additional information.
During fiscal 2019 and 2018, the effect of a hypothetical 1% change in exchange rates would have impacted
accumulated other comprehensive income by approximately $31 million and $37 million, respectively. This impact
does not consider the effects of a stronger or weaker dollar on our ability to compete for export business or the
overall economic activity that could exist in such an environment. Changes in foreign exchange rates could impact
the price and the demand for our products. See Item 1A. “Risk Factors — We May Be Adversely Affected by
Factors That Are Beyond Our Control, Such as U.S. and Worldwide Economic and Financial Market
Conditions, and Social and Political Change”.
53
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Description
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
Management’s Annual Report on Internal Control Over Financial Reporting
Page
Reference
55
56
57
58
60
62
139
143
145
For supplemental quarterly financial information, please see “Note 23. Financial Results by Quarter
(Unaudited)” of the Notes to Consolidated Financial Statements.
54
WESTROCK COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
Net sales
Cost of goods sold
Selling, general and administrative, excluding intangible
amortization
Selling, general and administrative intangible amortization
(Gain) loss on disposal of assets
Multiemployer pension withdrawal (income) expense
Land and Development impairments
Restructuring and other costs
Operating profit
Interest expense, net
(Loss) gain on extinguishment of debt
Pension and other postretirement non-service income
Other income, net
Equity in income of unconsolidated entities
Gain on sale of HH&B
Income before income taxes
Income tax (expense) benefit
Consolidated net income
Less: Net (income) loss attributable to noncontrolling
interests
Net income attributable to common stockholders
Basic earnings per share attributable to common
stockholders
Diluted earnings per share attributable to common
stockholders
Cash dividends paid per share
Year Ended September 30,
2018
2017
2019
$
18,289.0 $
14,540.0
16,285.1 $
12,923.1
14,859.7
12,141.5
1,715.2
400.2
(41.2)
(6.3)
13.0
173.7
1,494.4
(431.3)
(5.1)
74.2
2.4
10.1
—
1,144.7
(276.8)
867.9
1,546.6
296.6
10.1
184.2
31.9
105.4
1,187.2
(293.8)
(0.1)
95.3
12.7
33.5
—
1,034.8
874.5
1,909.3
1,457.2
229.6
4.8
—
46.7
196.7
783.2
(222.5)
1.8
51.8
11.5
39.0
192.8
857.6
(159.0)
698.6
(5.0)
862.9 $
(3.2)
1,906.1 $
9.6
708.2
3.36 $
7.46 $
2.81
3.33 $
7.34 $
2.77
1.82 $
1.72 $
1.60
$
$
$
$
See Accompanying Notes
55
WESTROCK COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Consolidated net income
Other comprehensive (loss) income, net of tax:
Foreign currency:
Foreign currency translation (loss) gain
Sale of HH&B
Derivatives:
Deferred gain on cash flow hedges
Reclassification adjustment of net (gain) loss on cash
flow hedges included in earnings
Unrealized gain on available for sale security
Reclassification adjustment of gain on available for
sale security included in earnings
Defined benefit pension and other postretirement benefit
plans:
Net actuarial (loss) gain arising during period
Amortization and settlement recognition of net
actuarial loss, included in pension and
postretirement cost
Prior service (cost) credit arising during period
Amortization and curtailment recognition of prior
service cost (credit), included in pension and
postretirement cost
Sale of HH&B
Other comprehensive (loss) income, net of tax
Comprehensive income
Less: Comprehensive (income) loss attributable to
noncontrolling interests
Comprehensive income attributable to common
stockholders
Year Ended September 30,
2018
2017
2019
$
867.9 $
1,909.3 $
698.6
(143.4)
—
(234.4)
—
1.1
(0.2)
—
—
0.5
0.8
—
(1.5)
80.7
26.8
—
(0.5)
0.7
—
(248.5)
(13.1)
22.2
17.2
(3.3)
15.0
(5.5)
36.0
0.7
1.8
—
(375.3)
492.6
0.2
—
(238.0)
1,671.3
(0.2)
2.9
169.3
867.9
(3.6)
(3.2)
9.4
$
489.0 $
1,668.1 $
877.3
See Accompanying Notes
56
WESTROCK COMPANY
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
ASSETS
Current Assets:
Cash and cash equivalents
Accounts receivable (net of allowances of $53.2 and $49.7)
Inventories
Other current assets
Assets held for sale
Total current assets
Property, plant and equipment, net
Goodwill
Intangibles, net
Restricted assets held by special purpose entities
Prepaid pension asset
Other assets
Total Assets
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt
Accounts payable
Accrued compensation and benefits
Other current liabilities
Total current liabilities
Long-term debt due after one year
Pension liabilities, net of current portion
Postretirement benefit liabilities, net of current portion
Non-recourse liabilities held by special purpose entities
Deferred income taxes
Other long-term liabilities
Commitments and contingencies (Notes 15 and 18)
Redeemable noncontrolling interests
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;
257.8 million and 253.5 million shares outstanding at September
30, 2019 and September 30, 2018, respectively
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Total stockholders’ equity
Noncontrolling interests
Total equity
Total Liabilities and Equity
September 30,
2019
2018
$
$
151.6 $
2,193.2
2,107.5
496.2
25.8
4,974.3
11,189.5
7,285.6
4,059.5
1,274.3
224.7
1,148.8
30,156.7 $
$
561.1 $
1,831.8
470.4
571.8
3,435.1
9,502.3
294.0
162.1
1,145.2
2,878.0
1,053.9
1.9
—
2.6
10,739.4
1,997.1
(1,069.2)
11,669.9
14.3
11,684.2
30,156.7 $
$
636.8
2,010.7
1,829.6
248.5
59.5
4,785.1
9,082.5
5,577.6
3,122.0
1,281.0
420.0
1,092.3
25,360.5
740.7
1,716.8
399.3
476.5
3,333.3
5,674.5
261.3
134.8
1,153.7
2,321.5
994.8
4.2
—
2.5
10,588.9
1,573.3
(695.3)
11,469.4
13.0
11,482.4
25,360.5
See Accompanying Notes
57
WESTROCK COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(In millions, except per share data)
Number of Shares of Common Stock Outstanding:
Balance at beginning of fiscal year
Shares issued under restricted stock plan
Issuance of common stock, net of stock received for minimum tax
withholdings (1) (2)
Purchases of common stock (3)
Balance at end of fiscal year
Common Stock:
Balance at beginning of fiscal year
Issuance of common stock, net of stock received for minimum tax
withholdings (1)
Purchases of common stock (3)
Balance at end of fiscal year
Capital in Excess of Par Value:
Balance at beginning of fiscal year
Income tax benefit from share-based plans
Compensation expense under share-based plans
Issuance of common stock, net of stock received for minimum tax
withholdings (1)
Fair value of share-based awards issued in business combinations
Purchases of common stock (3)
Separation of Specialty Chemicals business
Balance at end of fiscal year
Retained Earnings (Deficit):
Balance at beginning of fiscal year
Adoption of revenue from contracts with customers
standard
Net income attributable to common stockholders
Dividends declared (per share - $1.82, $1.72 and $1.60) (4)
Issuance of common stock, net of stock received for minimum tax
withholdings
Purchases of common stock (3)
Balance at end of fiscal year
Accumulated Other Comprehensive Loss:
Balance at beginning of fiscal year
Other comprehensive (loss) income, net of tax
Balance at end of fiscal year
Total Stockholders’ equity
Noncontrolling Interests: (5)
Balance at beginning of fiscal year
Net income (loss)
Contributions
Distributions and adjustments to noncontrolling interests
Balance at end of fiscal year
Total equity
$
Year Ended September 30,
2018
2017
2019
253.5
3.2
3.2
(2.1)
257.8
254.5
0.7
1.7
(3.4)
253.5
$
2.5 $
2.5 $
0.1
—
2.6
10,588.9
—
64.8
101.1
70.8
(86.2)
—
10,739.4
—
—
2.5
10,624.9
—
66.9
38.9
—
(141.8)
—
10,588.9
251.0
1.1
4.2
(1.8)
254.5
2.5
—
—
2.5
10,458.6
4.3
60.6
181.6
1.9
(76.3)
(5.8)
10,624.9
1,573.3
172.4
(105.9)
43.5
862.9
(479.8)
(0.4)
(2.4)
1,997.1
(695.3)
(373.9)
(1,069.2)
11,669.9
13.0
3.2
0.2
(2.1)
14.3
11,684.2 $
—
1,906.1
(445.2)
(6.7)
(53.3)
1,573.3
(457.3)
(238.0)
(695.3)
11,469.4
43.6
2.1
0.5
(33.2)
13.0
11,482.4 $
—
708.2
(407.3)
(5.9)
(16.7)
172.4
(626.4)
169.1
(457.3)
10,342.5
101.2
(12.9)
—
(44.7)
43.6
10,386.1
(1)
(2)
Included in the issuance of common stock in fiscal 2019 is the issuance of approximately 1.6 million shares of Common
Stock valued at $70.1 million in connection with the KapStone Acquisition. Included in the issuance of common stock in
fiscal 2017 is the issuance of approximately 2.4 million shares of Common Stock valued at $136.1 million in connection
with the June 9, 2017 acquisition of U.S. Corrugated Holdings, Inc. (the “U.S. Corrugated Acquisition”).
In connection with the acquisition of Smurfit-Stone, there were approximately 1.4 million shares of Common Stock
reserved, but unissued at the time of the acquisition for the resolution of Smurfit-Stone bankruptcy claims. At September
30, 2017, 0.2 million shares remained reserved and unissued. The remaining shares were issued in fiscal 2018 as the
claim’s distribution process was completed.
58
(3)
(4)
In fiscal 2019, we repurchased approximately 2.1 million shares of our Common Stock for an aggregate cost of $88.6
million. In fiscal 2018, we repurchased approximately 3.4 million shares of our Common Stock for an aggregate cost of
$195.1 million. In fiscal 2017, we repurchased approximately 1.8 million shares of our Common Stock for an aggregate
cost of $93.0 million.
Includes cash dividends paid, dividend equivalent units on certain restricted stock awards and dividends declared, but
unpaid related to the shares reserved but unissued at the time of the acquisition for the resolution of Smurfit-Stone
bankruptcy claims.
(5) Excludes amounts related to contingently redeemable noncontrolling interests, which are separately classified outside of
permanent equity in the Consolidated Balance Sheets.
See Accompanying Notes
59
WESTROCK COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Operating activities:
Consolidated net income
Adjustments to reconcile consolidated net income to net cash
provided by operating activities:
Depreciation, depletion and amortization
Cost of real estate sold
Deferred income tax expense (benefit)
Share-based compensation expense
Pension and other postretirement funding (more) than expense
(income)
Multiemployer pension withdrawals
Gain on sale of HH&B
Land and Development impairments
Other impairment adjustments
(Gain) loss on disposal of plant, equipment and other, net
Other
Change in operating assets and liabilities, net of acquisitions and
divestitures:
Accounts receivable
Inventories
Other assets
Accounts payable
Income taxes
Accrued liabilities and other
Net cash provided by operating activities
Investing activities:
Capital expenditures
Cash paid for purchase of businesses, net of cash acquired
Cash receipts on sold trade receivables
Investment in unconsolidated entities
Proceeds from sale of HH&B
Proceeds from sale of property, plant and equipment
Proceeds from property, plant and equipment insurance settlement
Other
Net cash used for investing activities
Financing activities:
Proceeds from issuance of notes
Additions (repayments) to revolving credit facilities
Additions to debt
Repayments of debt
Changes in commercial paper, net
Other financing additions (repayments)
Issuances of common stock, net of related minimum tax withholdings
Purchases of common stock
Cash dividends paid to stockholders
Cash distributions paid to noncontrolling interests
Other
Net cash provided by (used for) financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted
cash
(Decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
2019
Year Ended September 30,
2018
2017
$
867.9 $
1,909.3 $
698.6
1,511.2
17.3
37.1
64.2
(61.3)
(6.3)
—
13.0
38.3
(43.0)
(80.2)
272.9
(110.5)
(124.6)
(39.1)
7.2
(53.9)
2,310.2
(1,369.1)
(3,374.2)
—
(11.2)
—
119.1
25.5
30.3
(4,579.6)
2,498.2
37.2
5,061.6
(5,631.6)
339.2
10.0
18.3
(88.6)
(467.9)
(4.3)
8.1
1,780.2
1,252.2
121.2
(1,069.4)
66.8
(96.8)
184.2
—
31.9
13.5
2.9
(96.3)
(580.1)
(72.1)
(67.7)
180.3
130.6
20.7
1,931.2
(999.9)
(239.9)
461.6
(114.3)
—
23.3
7.9
46.2
(815.1)
1,197.3
(115.5)
855.2
(2,032.9)
—
(24.2)
26.6
(195.1)
(440.9)
(33.3)
7.7
(755.1)
4.0
(485.2)
636.8
151.6 $
(28.2)
332.8
304.0
636.8 $
$
1,112.1
207.9
(20.4)
58.0
(51.0)
—
(192.8)
46.7
56.8
(8.4)
(87.3)
(520.1)
(48.2)
(44.7)
302.2
(67.1)
21.5
1,463.8
(778.6)
(1,588.5)
411.2
(2.5)
1,005.9
52.6
3.5
27.7
(868.7)
998.4
421.8
742.6
(2,331.9)
—
23.9
35.8
(93.0)
(403.2)
(47.0)
(2.8)
(655.4)
(2.1)
(62.4)
366.4
304.0
60
Supplemental disclosure of cash flow information:
(In millions)
Cash paid during the period for:
Income taxes, net of refunds
Interest, net of amounts capitalized
Year Ended September 30,
2018
2017
2019
$
$
226.1
412.5
$
$
60.5
284.4
$
$
227.6
239.0
Supplemental schedule of non-cash operating and investing activities:
In fiscal 2017, we contributed a subsidiary to an unconsolidated joint venture and deconsolidated another
subsidiary which resulted in the derecognition and recognition of certain non-cash items for the year ended
September 30:
(In millions)
Derecognized:
Accounts receivable
Inventories
Other assets
Accounts payable
Income taxes
Accrued liabilities and other
Recognized:
Investment in unconsolidated entities
2017
14.6
7.6
12.3
(7.9)
(1.4)
(12.0)
(16.7)
$
$
$
$
$
$
$
Supplemental schedule of non-cash investing and financing activities:
(In millions)
Non-cash investing activities:
Year Ended September 30,
2018
2019
2017
Deferred purchase price of trade receivables sold
$
—
$
436.7
$
422.2
Liabilities assumed in fiscal 2019 primarily relate to the KapStone Acquisition. Liabilities assumed in fiscal
2018 primarily relate to the Plymouth Packaging Acquisition and the Schlüter Acquisition. Liabilities assumed in
fiscal 2017 relate to the MPS Acquisition, the U.S. Corrugated Acquisition, the July 17, 2017 acquisition (the
“Island Container Acquisition”) of certain assets and liabilities of Island Container Corp. and Combined
Container Industries LLC (“Island”), the acquisition of Hanna Group Pty Ltd (“Hanna Group”) in a stock purchase
(the “Hannapak Acquisition”) and the March 13, 2017 acquisition of certain assets and liabilities of Star Pizza Box
of Arizona, LLC, Star Pizza Box of Florida, Inc., Star Pizza Box of Ohio, LLC, Star Pizza Box of Texas, LLC and
Box Logistics LLC (the “Star Pizza Acquisition” and “Star Pizza”). See “Note 3. Acquisitions and Investment”
for additional information.
(In millions)
Year Ended September 30,
2018
2017
2019
Fair value of assets acquired, including goodwill
$
Cash consideration for the purchase of businesses, net of cash acquired
Stock issued in business combinations
Fair value of share-based awards issued in business combinations
Deferred payments and (unpaid) unreceived working capital or escrow
$
Liabilities and noncontrolling interest assumed
5,948.9 $
(3,369.3)
(70.1)
(70.8)
16.6
2,455.3 $
303.2 $
(242.1)
—
—
(25.0)
36.1 $
3,342.4
(1,592.0)
(136.1)
(1.9)
4.6
1,617.0
See Accompanying Notes
61
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
Description of Business and Summary of Significant Accounting Policies
Description of Business
Unless the context otherwise requires, “we”, “us”, “our”, “WestRock” and “the Company” refer to the business
of WestRock Company, its wholly-owned subsidiaries and its partially-owned consolidated subsidiaries for periods
on or after November 2, 2018 and to WRKCo Inc. (formerly known as WestRock Company) for periods prior to
November 2, 2018.
WestRock is a multinational provider of paper and packaging solutions for consumer and corrugated
packaging markets. We partner with our customers to provide differentiated paper and packaging solutions that
help them win in the marketplace. Our team members support customers around the world from our operating and
business locations in North America, South America, Europe, Asia and Australia.
WestRock was formed on March 6, 2015 for the purpose of effecting the Combination and, prior to the
Combination, did not conduct any activities other than those incidental to its formation and the matters
contemplated by the Business Combination Agreement. On July 1, 2015, pursuant to the Business Combination
Agreement, RockTenn and MWV completed a strategic combination of their respective businesses and RockTenn
and MWV each became wholly-owned subsidiaries of WestRock. RockTenn was the accounting acquirer in the
Combination.
On May 15, 2016, WestRock completed the Separation, pursuant to which we disposed of our former Specialty
Chemicals segment in its entirety and ceased to consolidate its assets, liabilities and results of operations in our
consolidated financial statements and treated the former Specialty Chemicals segment as discontinued
operations.
On January 23, 2017, we announced we had entered into an agreement with certain subsidiaries of Silgan
Holdings Inc. (“Silgan”) under which Silgan would purchase HH&B for approximately $1.025 billion in cash plus the
assumption of approximately $25 million in foreign pension liabilities. Accordingly, in the second quarter of fiscal
2017, all of the assets and liabilities of HH&B were reported as assets and liabilities held for sale. We discontinued
recording depreciation and amortization while the assets were held for sale. On April 6, 2017, we announced that
we had completed the HH&B Sale. We used the proceeds from the HH&B Sale in connection with the MPS
Acquisition. We recorded a pre-tax gain on sale of HH&B of $192.8 million in fiscal 2017.
On June 6, 2017, we completed the MPS Acquisition. MPS is a global provider of print-based specialty
packaging solutions and its differentiated product offering includes premium folding cartons, inserts, labels and
rigid packaging. MPS is reported in our Consumer Packaging segment. See “Note 3. Acquisitions and
Investment” for additional information.
On November 2, 2018, we completed the KapStone Acquisition. KapStone is a leading North American
producer and distributor of containerboard, corrugated products and specialty papers, including liner and medium
containerboard, kraft papers and saturating kraft. KapStone also owns Victory Packaging, a packaging solutions
distribution company with facilities in the U.S., Canada and Mexico. KapStone is reported in our Corrugated
Packaging segment. WRKCo (formerly known as WestRock Company) was the accounting acquirer in the
transaction; therefore, the historical consolidated financial statements of WRKCo for periods prior to the KapStone
Acquisition are also considered to be the historical financial statements of the Company. See “Note 3.
Acquisitions and Investment” for additional information.
Consolidation
The consolidated financial statements include our accounts and the accounts of our partially-owned
consolidated subsidiaries. Equity investments in which we exercise significant influence but do not control and are
not the primary beneficiary are accounted for using the equity method. Investments in which we are not able to
62
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
exercise significant influence over the investee are accounted for under the cost method. Our equity and cost
method investments are not significant either individually or in the aggregate. We have eliminated all significant
intercompany accounts and transactions. See “Note 7. Segment Information” for our equity method investments.
Reclassifications
We aligned our financial results for all periods presented to align our reportable segments as discussed in
“Note 7. Segment Information”, we have accounted for the retrospective adoption of certain accounting
standards as discussed in “Note 1. Description of Business and Summary of Significant Accounting Policies
– New Accounting Standards - Recently Adopted”, and we have accounted for changes in our Rule 3-10 of
Regulation S-X disclosures as outlined in “Note 14. Selected Condensed Consolidating Financial Statements
of Parent, Issuer, Guarantors and Non-Guarantors”.
Use of Estimates
Preparing consolidated financial statements in conformity with GAAP requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from those estimates, and the differences could be material.
The most significant accounting estimates inherent in the preparation of our consolidated financial statements
include estimates to evaluate the recoverability of goodwill, intangibles and property, plant and equipment, to
determine the useful lives of assets that are amortized or depreciated, and to measure income taxes, self-insured
obligations, restructuring activities and allocate the purchase price of an acquired business to the fair value of
acquired assets and liabilities. In addition, significant estimates form the basis for our reserves with respect to
collectability of accounts receivable, inventory valuations, pension benefits, deferred tax asset valuation
allowances and certain benefits provided to current and retired employees. Various assumptions and other factors
underlie the determination of these significant estimates. The process of determining significant estimates is fact
specific and takes into account factors such as historical experience, current and expected economic conditions,
product mix, and in some cases, actuarial techniques. We regularly evaluate these significant factors and make
adjustments where facts and circumstances dictate.
Revenue Recognition
We generally recognize revenue on a point-in-time basis when the customer takes title to the goods and
assumes the risks and rewards for the goods. Additionally, we manufacture certain customized products that have
no alternative use to us (since they are made to specific customer orders), and we believe that for certain
customers we have a legally enforceable right to payment for performance completed to date on these products,
including a reasonable profit. For products that meet these two criteria, we recognize revenue “over time”. This
results in revenue recognition prior to the date of shipment or title transfer for these products and increases the
contract asset (unbilled receivables) balance with a corresponding reduction in finished goods inventory on our
balance sheet.
We net, against our gross sales, provisions for discounts, returns, allowances, customer rebates and other
adjustments. Such adjustments are based on historical experience which is consistent with the most likely method
as provided in Financial Accounting Standards Board’s (“FASB”) Accounting Standard Codification (“ASC”) 606
“Revenue from Contracts with Customers” (“ASC 606”).
Shipping and Handling Costs
We classify shipping and handling costs, such as freight to our customers’ destinations, as a component of
cost of goods sold. When shipping and handling costs are included in the sales price charged for our products,
they are recognized in net sales since we treat shipping and handling as fulfilment activities.
63
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cash Equivalents
We consider all highly liquid investments that mature three months or less from the date of purchase to be
cash equivalents. The carrying amounts we report in the consolidated balance sheets for cash and cash
equivalents approximate fair market values. We place our cash and cash equivalents primarily with large credit
worthy banks, which limits the amount of our credit exposure.
Accounts Receivable and Allowances
We derive our accounts receivable from revenue earned from customers located primarily in North America,
South America, Europe, Asia and Australia. Given our diverse customer base, we have limited exposure to credit
loss from any particular customer or industry segment, and hence we generally do not require collateral. We
perform an evaluation of probable credit losses inherent in our accounts receivable at each balance sheet date.
Such an evaluation includes consideration of historical loss experience, trends in customer payment frequency,
present economic conditions, and judgment about the future financial health of our customers and industry sector.
The average of our receivables collection is within 30 to 60 days. We sell certain receivables under our A/R Sales
Agreement.
We state accounts receivable at the amount owed by the customer, net of an allowance for estimated
uncollectible accounts, returns and allowances, cash discounts and other adjustments. We do not discount
accounts receivable because we generally collect accounts receivable over a relatively short time. We account for
sales and other taxes that are imposed on and concurrent with individual revenue-producing transactions between
a customer and us on a net basis which excludes the taxes from our net sales. We charge off receivables when
they are determined to be no longer collectible. In fiscal 2019, 2018 and 2017 our bad debt expense was not
significant.
The following table represents a summary of the changes in the reserve for allowance for doubtful accounts,
returns and allowances and cash discounts for fiscal 2019, 2018 and 2017 (in millions):
Balance at beginning of fiscal year
Reduction in sales and charges to costs and expenses
Deductions
Balance at end of fiscal year
2019
2018
2017
$
$
49.7 $
259.6
(256.1)
53.2 $
45.8 $
202.8
(198.9)
49.7 $
36.5
215.6
(206.3)
45.8
Inventories
We value the majority of our U.S. inventories at the lower of cost or market, with cost determined on the last-in
first-out (“LIFO”) basis. We value all other inventories at the lower of cost and net realizable value, with cost
determined using methods that approximate cost computed on a first-in first-out inventory valuation method
(“FIFO”) basis. These other inventories represent primarily foreign inventories, distribution business inventories,
spare parts inventories and certain inventoried supplies and aggregate to approximately 39% and 31% of FIFO
cost of all inventory at September 30, 2019 and 2018, respectively.
Prior to the application of the LIFO method, our U.S. operating divisions use a variety of methods to estimate
the FIFO cost of their finished goods inventories. Such methods include standard costs, or average costs
computed by dividing the actual cost of goods manufactured by the tons produced and multiplying this amount by
the tons of inventory on hand. Lastly, certain operations calculate a ratio, on a plant by plant basis, the numerator
of which is the cost of goods sold and the denominator is net sales. This ratio is applied to the estimated sales
value of the finished goods inventory. Variances and other unusual items are analyzed to determine whether it is
appropriate to include those items in the value of inventory. Examples of variances and unusual items that are
considered to be current period charges include, but are not limited to, abnormal production levels, freight,
handling costs, and wasted materials (spoilage). Cost includes raw materials and supplies, direct labor, indirect
labor related to the manufacturing process and depreciation and other factory overheads. Our inventoried spare
parts are measured at average cost.
64
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Property, Plant and Equipment
We state property, plant and equipment at cost less accumulated depreciation. Cost includes major
expenditures for improvements and replacements that extend useful lives, increase capacity, increase revenues or
reduce costs, while normal maintenance and repairs are expensed as incurred. During fiscal 2019, 2018 and 2017,
we capitalized interest of approximately $23.8 million, $8.2 million and $7.0 million, respectively. For financial
reporting purposes, we provide depreciation and amortization primarily on a straight-line method generally over the
estimated useful lives of the assets as follows:
Buildings and building improvements
Machinery and equipment
Transportation equipment
15-40 years
3-25 years
3-8 years
Generally, our machinery and equipment have estimated useful lives between 3 and 25 years; however, select
portions of machinery and equipment primarily at our mills have estimated useful lives up to 44 years. Greater than
90% of the cost of our mill assets have useful lives of 25 years or less. Leasehold improvements are depreciated
over the shorter of the asset life or the lease term, generally between 3 and 10 years.
Goodwill and Long-Lived Assets
We review the carrying value of our goodwill annually at the beginning of the fourth quarter of each fiscal year,
or more often if events or changes in circumstances indicate that the carrying amount may exceed fair value as set
forth in ASC 350, “Intangibles — Goodwill and Other.” We test goodwill for impairment at the reporting unit level,
which is an operating segment or one level below an operating segment, referred to as a component. A component
of an operating segment is a reporting unit if the component constitutes a business for which discrete financial
information is available and segment management regularly reviews the operating results of that component.
However, two or more components of an operating segment are aggregated and deemed a single reporting unit if
the components have similar economic characteristics. The amount of goodwill acquired in a business combination
that is assigned to one or more reporting units as of the acquisition date is the excess of the purchase price of the
acquired businesses (or portion thereof) included in the reporting unit, over the fair value assigned to the individual
assets acquired or liabilities assumed. Goodwill is assigned to the reporting unit(s) expected to benefit from the
synergies of the combination even though other assets or liabilities of the acquired entity may not be assigned to
that reporting unit. We determine recoverability by comparing the estimated fair value of the reporting unit to which
the goodwill applies to the carrying value, including goodwill, of that reporting unit. We determine the fair value of
each reporting unit using the discounted cash flow method or, as appropriate, a combination of the discounted
cash flow method and the guideline public company method.
The goodwill impairment model is a two-step process. ASC 350 allows a qualitative assessment, prior to step
one, to determine whether it is more likely than not that the fair value of a reporting unit exceeds its carrying
amount. We generally do not attempt a qualitative assessment and move directly to step one. In step one, we
utilize the present value of expected cash flows or, as appropriate, a combination of the present value of expected
cash flows and the guideline public company method to determine the estimated fair value of our reporting units.
This present value model requires management to estimate future cash flows, the timing of these cash flows, and a
discount rate (based on a weighted average cost of capital), which represents the time value of money and the
inherent risk and uncertainty of the future cash flows. Factors that management must estimate when performing
this step in the process include, among other items, sales volume, prices, inflation, discount rates, exchange rates,
tax rates, anticipated synergies and productivity improvements resulting from acquisitions, capital expenditures
and continuous improvement projects. The assumptions we use to estimate future cash flows are consistent with
the assumptions that the reporting units use for internal planning purposes, updated to reflect current expectations.
The guideline public company method involves comparing the reporting unit to similar companies whose stock is
freely traded on an organized exchange. The fair values determined by the discounted cash flow and guideline
public company methods were weighted to arrive at the concluded fair value of the reporting unit. However, in
instances where comparisons to our peers was less meaningful, no weight was placed on the guideline public
company method to arrive at the concluded fair value of the reporting unit. If we determine that the estimated fair
value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. If we
determine that the carrying amount of the reporting unit exceeds its estimated fair value, we would complete step
two of the impairment analysis. Step two involves determining the implied fair value of the reporting unit’s goodwill
65
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and comparing it to the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill
exceeds the implied fair value of that goodwill, we recognize an impairment loss in an amount equal to that excess.
While Accounting Standard Update (“ASU 2017-04”), “Simplifying the Test for Goodwill Impairment”, amends the
guidance in ASC 350, we have not yet adopted the ASU and do not expect these provisions to have a material
impact on our consolidated financial statements.
During the third quarter of fiscal 2019, we tested our goodwill for potential impairment on an interim basis due
to changing market conditions, including the impact on the trading price of our Common Stock. All reporting units
that have goodwill were noted to have a fair value that exceeded their carrying values as of the interim impairment
test date. The discount rate used for each reporting unit ranged from 8.5% to 14.0%. We used perpetual growth
rates in the reporting units that have goodwill ranging from 0.0% to 1.0%. Our Consumer Packaging and Victory
Packaging reporting units had fair values that exceeded their respective carrying values by less than 10% each,
primarily due to the fair value accounting related to the Combination and the MPS Acquisition (for Consumer
Packaging) and the KapStone Acquisition (for Victory Packaging). If we had concluded that it was appropriate to
increase the discount rate we used by 100 basis points to estimate the fair value of each reporting unit that has
goodwill, the fair value of each of our reporting units would have continued to exceed its carrying value, except for
the Consumer Packaging reporting unit. The Consumer Packaging and Victory Packaging reporting units had
$3,590.6 million and $40.2 million of goodwill, respectively, at September 30, 2019. We reviewed the carrying
value of our goodwill at the beginning of the fourth quarter and continually monitored industry economic trends until
the end of our fiscal year and determined no additional testing for goodwill impairment was warranted. We have not
made any material changes to our impairment loss assessment methodology during the past three fiscal years.
Currently, we do not believe there is a reasonable likelihood that there will be a material change in future
assumptions or estimates we use to calculate impairment losses. However, if actual results are not consistent with
our assumptions and estimates, we may be exposed to impairment losses that could be material.
We follow the provisions included in ASC 360, “Property, Plant and Equipment” in determining whether the
carrying value of any of our long-lived assets, including amortizing intangibles other than goodwill, is impaired. The
ASC 360 test is a three-step test for assets that are “held and used” as that term is defined by ASC 360. We
determine whether indicators of impairment are present. We review long-lived assets for impairment when events
or changes in circumstances indicate that the carrying amount of the long-lived asset might not be recoverable. If
we determine that indicators of impairment are present, we determine whether the estimated undiscounted cash
flows for the potentially impaired assets are less than the carrying value. This requires management to estimate
future cash flows through operations over the remaining useful life of the asset and its ultimate disposition. The
assumptions we use to estimate future cash flows are consistent with the assumptions we use for internal planning
purposes, updated to reflect current expectations. If our estimated undiscounted cash flows do not exceed the
carrying value, we estimate the fair value of the asset and record an impairment charge if the carrying value is
greater than the fair value of the asset. We estimate fair value using discounted cash flows, observable prices for
similar assets, or other valuation techniques. We record assets classified as “held for sale” at the lower of their
carrying value or estimated fair value less anticipated costs to sell.
Included in our long-lived assets are certain identifiable intangible assets. These intangible assets are
amortized based on the approximate pattern in which the economic benefits are consumed or straight-line if the
pattern was not reliably determinable. Estimated useful lives range from 1 to 40 years and have a weighted
average life of approximately 15.3 years.
Our judgments regarding the existence of impairment indicators are based on legal factors, market conditions
and operational performance. Future events could cause us to conclude that impairment indicators exist and that
assets associated with a particular operation are impaired. Evaluating impairment also requires us to estimate
future operating results and cash flows, which also require judgment by management. Any resulting impairment
loss could have a material adverse impact on our financial condition and results of operations.
Restructuring and Other Costs
Our restructuring and other costs include primarily items such as restructuring portions of our operations,
acquisition costs, integration costs and divestiture costs. We have restructured portions of our operations from time
to time, have current restructuring initiatives taking place, and it is likely that we will engage in future restructuring
activities. Identifying and calculating the cost to exit these operations requires certain assumptions to be made, the
most significant of which are anticipated future liabilities, including severance costs, leases and other contractual
66
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
obligations, and the adjustment of property, plant and equipment to net realizable value. We believe our estimates
are reasonable, considering our knowledge of the industries we operate in, previous experience in exiting activities
and valuations we may obtain from independent third parties. Although our estimates have been reasonably
accurate in the past, significant judgment is required, and these estimates and assumptions may change as
additional information becomes available and facts or circumstances change. See “Note 4. Restructuring and
Other Costs” for additional information, including a description of the type of costs incurred.
Business Combinations
From time to time, we may enter into business combinations. In accordance with ASC 805, “Business
Combinations”, we generally recognize the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interests in an acquiree at their fair values as of the date of acquisition. We measure goodwill as the
excess of consideration transferred, which we also measure at fair value, over the net of the acquisition date fair
values of the identifiable assets acquired and liabilities assumed. The acquisition method of accounting requires us
to make significant estimates and assumptions regarding the fair values of the elements of a business combination
as of the date of acquisition, including the fair values of identifiable intangible assets, deferred tax asset valuation
allowances, liabilities including those related to debt, pensions and other postretirement plans, uncertain tax
positions, contingent consideration and contingencies. Significant estimates and assumptions include subjective
and/or complex judgements regarding items such as discount rates, customer attrition rates, economic lives and
other factors, including estimating future cash flows that we expect to generate from the acquired assets.
The acquisition method of accounting also requires us to refine these estimates over a measurement period
not to exceed one year to reflect new information obtained about facts and circumstances that existed as of the
acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. If
we are required to adjust provisional amounts that we have recorded for the fair values of assets and liabilities in
connection with acquisitions, these adjustments could have a material impact on our financial condition and results
of operations. If the subsequent actual results and updated projections of the underlying business activity change
compared with the assumptions and projections used to develop these values, we could record future impairment
charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to
calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or
amortization expenses could be increased or decreased, or the acquired asset could be impaired.
Fair Value of Financial Instruments and Nonfinancial Assets and Liabilities
We estimate fair values in accordance with ASC 820, “Fair Value Measurement.” We define fair value as the
price that would be received from the sale of an asset or paid to transfer a liability in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date.
Financial instruments not recognized at fair value on a recurring or nonrecurring basis include cash and cash
equivalents, accounts receivables, certain other current assets, short-term debt, accounts payable, certain other
current liabilities and long-term debt. With the exception of long-term debt, the carrying amounts of these financial
instruments approximate their fair values due to their short maturities. The fair values of our long-term debt are
estimated using quoted market prices or are based on the discounted value of future cash flows. We disclose the
fair value of long-term debt in “Note 13. Debt” and our pension and postretirement assets and liabilities in “Note 5.
Retirement Plans”. We have, or from time to time may have, financial instruments recognized at fair value
including supplemental retirement savings plans (“Supplemental Plans”) that are nonqualified deferred
compensation plans pursuant to which assets are invested primarily in mutual funds, interest rate derivatives,
commodity derivatives or other similar class of assets or liabilities, the fair value of which are not significant. We
measure the fair value of our mutual fund investments based on quoted prices in active markets, and our derivative
contracts, if any, based on discounted cash flows.
We measure certain nonfinancial assets and nonfinancial liabilities at fair value on a nonrecurring basis. These
assets and liabilities include cost and equity method investments when they are deemed to be other-than-
temporarily impaired, assets acquired and liabilities assumed in a merger or an acquisition or in a nonmonetary
exchange, and property, plant and equipment and goodwill and other intangible assets that are written down to fair
value when they are held for sale or determined to be impaired. Given the nature of nonfinancial assets and
liabilities, evaluating their fair value from the perspective of a market participant is inherently complex.
67
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Assumptions and estimates about future values can be affected by a variety of internal and external factors.
Changes in these factors may require us to revise our estimates and could result in future impairment charges for
goodwill and acquired intangible assets, or retroactively adjust provisional amounts that we have recorded for the
fair values of assets and liabilities in connection with business combinations. These adjustments could have a
material impact on our financial condition and results of operations. We discuss fair values in more detail in “Note
12. Fair Value”.
Derivatives
We are exposed to interest rate risk, commodity price risk and foreign currency exchange risk. To manage
these risks, from time to time and to varying degrees, we may enter into a variety of financial derivative
transactions and certain physical commodity transactions that are determined to be derivatives. Interest rate
swaps may be entered into to manage the interest rate risk associated with a portion of our outstanding debt.
Interest rate swaps are either designated for accounting purposes as cash flow hedges of forecasted floating
interest payments on variable rate debt or fair value hedges of fixed rate debt, or we may elect not to treat them as
accounting hedges. Swaps or forward contracts on certain commodities may be entered into to manage the price
risk associated with forecasted purchases or sales of those commodities. In addition, certain commodity financial
derivative contracts and physical commodity contracts that are determined to be derivatives may not be designated
as accounting hedges because either they do not meet the criteria for treatment as accounting hedges under ASC
815, “Derivatives and Hedging”, or we elect not to treat them as accounting hedges under ASC 815. Generally, we
elect the normal purchase, normal sale scope exception for physical commodity contracts that are determined to
be derivatives. We may also enter into forward contracts to manage our exposure to fluctuations in foreign
currency rates with respect to transactions denominated in foreign currencies. These also can either be designated
for accounting purposes as cash flow hedges or not so designated.
Outstanding financial derivative instruments expose us to credit loss in the event of nonperformance by the
counterparties to the derivative agreements. Our credit exposure related to these financial instruments is
represented by the fair value of contracts reported as assets. We manage our exposure to counterparty credit risk
through minimum credit standards, diversification of counterparties and procedures to monitor concentrations of
credit risk. We may enter into financial derivative contracts that may contain credit-risk-related contingent features
which could result in a counterparty requesting immediate payment or demanding immediate and ongoing full
overnight collateralization on derivative instruments in net liability positions.
For financial derivative instruments that are designated as a cash flow hedge for accounting purposes, the
entire change in fair value of the financial derivative instrument is reported as a component of other comprehensive
income and reclassified into earnings in the same line item associated with the forecasted transaction, and in the
same period or periods during which the forecasted transaction affects earnings.
We have at times entered into interest rate swap agreements that effectively modified our exposure to interest
rate risk by converting a portion of our interest payments on floating rate debt to a fixed rate basis, thus reducing
the impact of interest rate changes on future interest expense. These agreements typically involved the receipt of
floating rate amounts in exchange for fixed interest rate payments over the life of the agreements without an
exchange of the underlying principal amount.
At September 30, 2019, the notional amounts of interest rate and foreign currency exchange contract
derivatives were $600.0 million and $351.0 million, respectively. At September 30, 2019, the notional amount of
natural gas commodity derivatives was 8.4 MMBtu. The fair value of these derivative instruments was not
significant as of September 30, 2019. At September 30, 2018, there were no interest rate or commodity derivatives
outstanding, and the notional amount of foreign currency derivatives was $356.0 million. See “Note 13. Debt” for
additional information on the foreign currency derivatives.
Health Insurance
We are self-insured for the majority of our group health insurance costs. However, we seek to limit our health
insurance costs by entering into certain stop loss insurance coverage. Due to mergers, acquisitions and other
factors, we may have plans that do not include stop loss insurance. We calculate our group health insurance
reserve on an undiscounted basis based on estimated reserve rates. We utilize claims lag data provided by our
68
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
claims administrators to compute the required estimated reserve rate. We calculate our average monthly claims
paid using the actual monthly payments during the trailing 12-month period. At that time, we also calculate our
required reserve using the reserve rates discussed above. While we believe that our assumptions are appropriate,
significant differences in our actual experience or significant changes in our assumptions may materially affect our
group health insurance costs.
Workers’ Compensation
We purchase large risk deductible workers’ compensation policies for the majority of our workers’
compensation liabilities that are subject to various deductibles to limit our exposure. We calculate our workers’
compensation reserves on an undiscounted basis based on estimated actuarially calculated development factors.
While we believe that our assumptions are appropriate, significant differences in our actual experience or
significant changes in our assumptions may materially affect our workers' compensation costs.
Income Taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events that have been included in the
financial statements. Under this method, deferred tax assets and liabilities are determined based on the
differences between the financial statement carrying amount and the tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in
tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment
date. All deferred tax assets and liabilities are classified as noncurrent in our consolidated balance sheet in
accordance with ASU 2015-17, “Income Taxes: Balance Sheet Classification of Deferred Taxes.”
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In
making such determination, we consider all available positive and negative evidence, including future reversals of
existing taxable temporary differences, projected future taxable income, tax planning strategies, recent financial
operations and their associated valuation allowances, if any. In the event we were to determine that we would be
able to realize or not realize our deferred income tax assets in the future in their net recorded amount, we would
make an adjustment to the valuation allowance, which would reduce or increase the provision for income taxes,
respectively.
Certain provisions of ASC 740, “Income Taxes” provide that a tax benefit from an uncertain tax position may be
recognized when it is more likely than not that the position will be sustained upon examination, including
resolutions of any related appeals or litigation processes, based on the technical merits. We use significant
judgment in determining (i) whether a tax position, based solely on its technical merits, is more likely than not to be
sustained upon examination, and (ii) measuring the tax benefit as the largest amount of benefit that is more likely
than not to be realized upon ultimate settlement. We do not record any benefit for the tax positions where we do
not meet the more likely than not initial recognition threshold. Income tax positions must meet a more likely than
not recognition threshold at the effective date to be recognized. Resolution of the uncertain tax positions could
have a material adverse effect on our cash flows or materially benefit our results of operations in future periods
depending upon their ultimate resolution.
On December 22, 2017, the Tax Act (as hereinafter defined) was signed into law. The Tax Act contained
significant changes to corporate taxation, including (i) the reduction of the corporate income tax rate to 21%, (ii) the
acceleration of expensing for certain business assets, (iii) the one-time transition tax related to the transition of
U.S. international tax from a worldwide tax system to a territorial tax system, (iv) the repeal of the domestic
production deduction, (v) additional limitations on the deductibility of interest expense and (vi) expanded limitations
on executive compensation. See “Note 6. Income Taxes.”
Pension and Other Postretirement Benefits
We account for pension and other postretirement benefits in accordance with ASC 715, “Compensation –
Retirement Benefits”. Accordingly, we recognize the funded status of our pension plans as assets or liabilities in
our consolidated balance sheets. The funded status is the difference between our projected benefit obligations and
fair value of plan assets. The determination of our obligation and expense for pension and other postretirement
69
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
benefits is dependent on our selection of certain assumptions used by actuaries in calculating such amounts. We
describe these assumptions in “Note 5. Retirement Plans”, which include, among others, the discount rate,
expected long-term rates of return on plan assets and rates of increase in compensation levels. As provided under
ASC 715, we defer actual results that differ from our assumptions, i.e. actuarial gains and losses, and amortize the
difference over future periods. Therefore, these differences generally affect our recognized expense and funding
requirements in future periods. Actuarial gains and losses occur when actual experience differs from the estimates
used to determine the components of net periodic pension cost and when certain assumptions used to determine
the fair value of the plan assets or projected benefit obligation are updated, such as but not limited to, changes in
the discount rate, plan amendments, differences between actual and expected returns on plan assets, mortality
assumptions and plan remeasurement.
The amount of unrecognized actuarial gains and losses recognized in the current year’s operations is based
on amortizing the unrecognized gains or losses for each plan that exceed the larger of 10% of the projected benefit
obligation or the fair value of plan assets, also known as “the corridor”. The amount of unrecognized gain or loss
that exceeds the corridor is amortized over the average future service of the plan participants or the average life
expectancy of inactive plan participants for plans where all or almost all of the plan participants are inactive. While
we believe that our assumptions are appropriate, significant differences in our actual experience or significant
changes in our assumptions may materially affect our pension and other postretirement benefit obligations and our
future expense.
Share-Based Compensation
We recognize expense for share-based compensation plans based on the estimated fair value of the related
awards in accordance with ASC 718, “Compensation – Stock Compensation”. Pursuant to our incentive stock
plans, we can grant options and restricted stock, stock appreciation rights (“SAR” or “SARs”) and restricted stock
units to employees and our non-employee directors. The grants generally vest over a period of up to three years
depending on the nature of the award, except for non-employee director grants, which typically vest over a period
of up to one year. The majority of our restricted stock grants to employees generally contain performance or
market conditions that must be met in conjunction with a service requirement for the shares to vest, others contain
only a service requirement. We charge compensation under the plan to earnings over each increment’s individual
vesting period. See “Note 21. Share-Based Compensation” for additional information.
Asset Retirement Obligations
We account for asset retirement obligations in accordance with ASC 410, “Asset Retirement and
Environmental Obligations”. A liability and an asset are recorded equal to the present value of the estimated costs
associated with the retirement of long-lived assets where a legal or contractual obligation exists and the liability can
be reasonably estimated. The liability is accreted over time and the asset is depreciated over the remaining life of
the related asset. Upon settlement of the liability, we will recognize a gain or loss for any difference between the
settlement amount and the liability recorded. Asset retirement obligations with indeterminate settlement dates are
not recorded until such time that a reasonable estimate may be made. Our asset retirement obligations consist
primarily of landfill closure and post-closure costs at certain of our mills. At September 30, 2019 and
September 30, 2018, we had recorded liabilities of $72.5 million and $72.9 million, respectively. The liabilities are
primarily reflected as other long-term liabilities on the consolidated balance sheets.
Repair and Maintenance Costs
We expense routine repair and maintenance costs as we incur them. We defer certain expenses we incur
during planned major maintenance activities and recognize the expenses ratably over the shorter of the estimated
interval until the next major maintenance activity or the life of the deferred item. This maintenance is generally
performed every twelve to twenty-four months and has a significant impact on our results of operations in the
period performed primarily due to lost production during the maintenance period. Planned major maintenance
costs deferred at September 30, 2019 and 2018 were $124.3 million and $83.4 million, respectively. The assets
are recorded as other assets on the consolidated balance sheets. The increase in fiscal 2019 was primarily due to
the acquired KapStone mills, as well as the varied timing and scope of outages.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Foreign Currency
We translate the assets and liabilities of our foreign operations from their functional currency into U.S. dollars
at the rate of exchange in effect as of the balance sheet date. We reflect the resulting translation adjustments in
equity. We translate the revenues and expenses of our foreign operations at a daily average rate prevailing for
each month during the fiscal year. We include gains or losses from foreign currency transactions, such as those
resulting from the settlement of foreign receivables or payables, in the consolidated statements of income. We
recorded a gain on foreign currency transactions of $18.5 million, $12.2 million and $4.3 in fiscal 2019, 2018 and
2017, respectively.
Environmental Remediation Costs
We accrue for losses associated with our environmental remediation obligations when it is probable that we
have incurred a liability and the amount of the loss can be reasonably estimated. We generally recognize accruals
for estimated losses from our environmental remediation obligations no later than completion of the remedial
feasibility study and adjust such accruals as further information develops or circumstances change. We recognize
recoveries of our environmental remediation costs from other parties as assets when we deem their receipt
probable. See “Note 18. Commitments and Contingencies.”
New Accounting Standards - Recently Adopted
During fiscal 2019, we filed with the SEC a Current Report on Form 8-K to provide revisions to our
consolidated financial statements, and the notes thereto for the three years ended September 30, 2018 and other
related disclosures, including the retrospective adoption of certain accounting standards for all periods therein,
including, but not limited to, ASU 2017-07 “Compensation – Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, ASU 2016-15
“Classification of Certain Cash Receipts and Cash Payments” (which amends the guidance in ASC 230,
“Statement of Cash Flows”) and ASU 2016-18 “Restricted Cash” (which amends the guidance in the ASC 230,
“Statement of Cash Flows”). See “Note 1. Description of Business and Summary of Significant Accounting
Policies — New Accounting Standards - Recently Adopted” of the Notes to Consolidated Financial Statements
section in Exhibit 99.1 of the May 9, 2019 Form 8-K for information on new accounting standards adopted on
October 1, 2018 on a retrospective basis for all periods therein.
In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income
(Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. The
amendments in this update provide financial statement preparers with an option to reclassify stranded tax effects
within accumulated other comprehensive income to retained earnings in the period of adoption or retrospectively in
each period in which the effect of the change in the U.S. federal corporate income tax rate in the U.S. government
enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) (or
portion thereof) is recorded. This ASU requires financial statement preparers to disclose (i) a description of the
accounting policy for releasing income tax effects from accumulated other comprehensive income; (ii) whether
they elect to reclassify the stranded income tax effects from the Tax Act; and (iii) information about the other
income tax effects that are reclassified. The amendments affect any organization that is required to apply the
provisions of ASC 220, “Income Statement – Reporting Comprehensive Income”, and has items of other
comprehensive income in which the related tax effects are included as required by GAAP. This ASU is effective for
fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We adopted the
provisions of this ASU for fiscal 2020 on October 1, 2019 and we estimate that the reclassification of stranded tax
effects from accumulated other comprehensive income to retained earnings to be approximately $70 to $75 million.
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging: Targeted Improvements to
Accounting for Hedging Activities” (“ASU 2017-12”). The amendments in this ASU better align an entity’s risk
management activities and financial reporting for hedging relationships through changes to both the designation
and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet
that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk
components and align the recognition and presentation of the effects of the hedging instrument and the hedged
item in the financial statements. The amendments in this ASU also make certain targeted improvements to simplify
the application of hedge accounting guidance and ease the administrative burden of hedge documentation
requirements and assessing hedge effectiveness. In October 2018, the FASB issued ASU 2018-16 “Derivatives
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and Hedging: Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a
Benchmark Interest Rate for Hedge Accounting” (“ASU 2018-16”), which adds the overnight index rate based on
the Secured Overnight Financing Rate to the list of U.S. benchmark interest rates in ASC 815 that are eligible to be
hedged. In April 2019, the FASB issued ASU 2019-04 “Codification Improvements to Topic 326, Financial
Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” (“ASU
2019-04”), which addresses targeted issues related to fair value hedges and clarifies certain transition
requirements. The provisions of ASU 2017-12, ASU 2018-16 and ASU 2019-04 are concurrently effective for fiscal
years beginning after December 15, 2019, including interim periods within those fiscal years, and should be
applied prospectively. We early adopted the provisions of ASU 2017-12, ASU 2018-16 and ASU 2019-04 in the
fourth quarter of fiscal 2019. These provisions did not have a material impact on our consolidated financial
statements.
In February 2016, the FASB issued ASU 2016-02 “Leases”, which is codified in ASC 842 “Leases” (“ASC
842”) and supersedes current lease guidance in ASC 840 “Leases”. These provisions require lessees to put a
right-of-use asset and lease liability on their balance sheet for operating and financing leases that have a term of
more than one year. Expense will be recognized in the income statement similar to current accounting guidance.
For lessors, this ASU modifies the classification criteria and the accounting for sales-type and direct financing
leases. Entities will need to disclose qualitative and quantitative information about their leases, including
characteristics and amounts recognized in the financial statements. These provisions are effective for fiscal years
beginning after December 15, 2018, including interim periods within those fiscal years. Prior to the FASB issuing
ASU 2018-11 “Leases”, entities were required to use a modified retrospective approach upon adoption to
recognize and measure leases at the beginning of the earliest comparative period presented in the financial
statements. In July 2018, the FASB issued ASU 2018-11, which provides entities the option to initially apply ASU
2016-02 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained
earnings in the period of adoption. Consequently, the comparative periods presented in the financial statements
would continue to be in accordance with current GAAP. In December 2018, the FASB issued ASU 2018-20
“Leases: Narrow-scope Improvements for Lessors” to help lessors apply ASC 842. This ASU allows lessors to
make an accounting policy election not to evaluate sales taxes and other similar taxes collected from lessees,
requires lessors to exclude from variable payments certain lessor costs paid directly by lessee to third parties on
the lessor’s behalf and provides clarification on variable payments allocated to lease and non-lease components.
In March 2019, the FASB issued ASU 2019-01 “Leases (Topic 842): Codification Improvements”, which (a)
provides guidance on lessors’ accounting for acquisition costs that will now generally be included in the
measurement of fair value of the underlying asset, (b) clarifies that lessors in scope of ASC 942, “Financial
Services—Depository and Lending” (“ASC 942”), have to follow cash flow presentation guidance under ASC 942
for payments received by lessors and (c) provides an exemption to all companies from interim transition disclosure
requirements of ASC 250 “Accounting Changes and Error Corrections” (“ASC 250”), in addition to the already
exempted annual disclosure requirement of ASC 250. ASU 2019-01 is effective for fiscal years beginning after
December 15, 2019 and interim periods within those fiscal years; however, companies are permitted to early adopt
ASU 2019-01 concurrent with, or any time after the adoption of, ASC 842.
We adopted the provisions of ASC 842 for fiscal 2020 on October 1, 2019, using the modified retrospective
approach and as a result will not restate prior periods. We have also elected the package of three practical
expedients permitted within the standard pursuant to which we will not reassess initial direct costs, lease
classification or whether our contracts contain or are leases. We have also made an accounting policy election to
not recognize right-of-use assets and liability for leases with a term of 12 months or less unless the lease includes
an option to renew or purchase the underlying asset that are reasonably certain to be exercised. Upon adoption,
we estimate to recognize a right-of-use asset of approximately $730 million to $760 million with its corresponding
lease liability representing the present value of the remaining minimum rental payments relating to leases currently
classified as operating leases. The adoption of ASC 842 does not have a significant impact on the recognition,
measurement, or presentation of lease expenses within the consolidated statements of income or the consolidated
statements of cash flows. We have also identified and implemented changes to our accounting policies and
practices, business processes, systems and designed and implemented specific controls over our evaluation of the
impact of the new standard and related guidance on us upon adoption, and on an ongoing basis, including
disclosure requirements and the collection of relevant data into the reporting process. While we have substantially
completed the process of quantifying the impacts that will result from applying the new standard, our assessment
will be finalized during the first quarter of fiscal 2020.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
New Accounting Standards - Recently Issued
In October 2018, the FASB issued ASU 2018-18 “Collaborative Arrangements (Topic 808): Clarifying the
Interaction Between Topic 808 and Topic 606”, which provides targeted amendments to ASC 808, “Collaborative
arrangements” (“ASC 808”) and ASC 606. The amendments in this ASU require transactions between participants
in a collaborative arrangement to be accounted for under ASC 606 when the counterparty is a customer. This ASU
precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue
from contracts with customers if the counterparty is not a customer for that transaction. This ASU also amends
ASC 808 to refer to the unit-of-account guidance in ASC 606 and requires it to be used only when assessing
whether a transaction is in scope of ASC 606. This ASU is effective for fiscal years ending after December 15,
2019 and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the
impact of this ASU.
In October 2018, the FASB issued ASU 2018-17 “Consolidation: Targeted Improvements to Related Party
Guidance for Variable Interest Entities.” This ASU changes how entities evaluate decision-making fees under the
variable interest entity guidance. To determine whether decision-making fees represent a variable interest, an
entity considers indirect interests held through related parties under common control on a proportionate basis,
rather than in their entirety, as currently required under GAAP. This ASU is effective for fiscal years ending after
December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. We are currently
evaluating the impact of this ASU.
In August 2018, the FASB issued ASU 2018-15 “Intangibles – Goodwill and Other – Internal-Use Software
(Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement
That Is a Service Contract”. The amendments in this ASU align the requirements for capitalizing implementation
costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing
implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include
an internal-use software license). The accounting for the service element of a hosting arrangement that is a service
contract is not affected by these amendments. The provisions may be adopted prospectively or retrospectively.
This ASU is effective for fiscal years, including interim periods within those fiscal years, beginning after December
15, 2019. Early adoption is permitted. We are currently evaluating the impact of this ASU.
In August 2018, the FASB issued ASU 2018-14 “Compensation – Retirement Benefits – Defined Benefit Plans
– General (Subtopic 715-20): Changes to the Disclosure Requirements for Defined Benefit Plans”. The
amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or
other postretirement plans to remove disclosures that no longer are considered cost beneficial, clarify the specific
requirements of disclosures and add disclosure requirements identified as relevant. These provisions will be
applied retrospectively. This ASU is effective for fiscal years ending after December 15, 2020. Early adoption is
permitted. We are currently evaluating the impact of this ASU.
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit losses: Measurement of Credit
Losses on financial Instruments (Topic 326)” (“ASU 2016-13”), which modifies the measurement of expected credit
losses of certain financial instruments. The ASU is effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years, and will be applied as a cumulative effect adjustment to retained
earnings as of the beginning of the first reporting period for which the guidance is effective. In April 2019, the FASB
issued ASU 2019-04 which addresses issues related to accrued interest receivable balances, recoveries, variable
interest rates and prepayments, among other things. In May 2019, the FASB issued ASU 2019-05 “Financial
Instruments – Credit Losses (Topic 326): Targeted Transition Relief” (“ASU 2019-05”), which provides targeted
transition relief allowing entities to make an irrevocable one-time election upon adoption of the new credit losses
standard to measure financial assets previously measured at amortized cost (except held-to-maturity securities)
using the fair value option. The provisions of ASU 2019-04 related to Topic 326 and ASU 2019-05 are effective
concurrent with the adoption of ASU 2016-13. We are currently evaluating the impact of these ASUs and do not
expect these provisions to have a material impact on our consolidated financial statements.
Note 2.
Revenue Recognition
We adopted ASC 606 and all related amendments on October 1, 2018 using the modified retrospective
method. We recorded the transition adjustment to the opening balance of retained earnings to account for the
73
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
cumulative effect of adopting ASC 606. Since we used the modified retrospective method, we have not restated
comparative information, which continues to be reported under the accounting standard in effect for those periods.
We manufacture certain customized products that have no alternative use to us (since they are made to
specific customer orders), and we believe that for certain customers we have a legally enforceable right to payment
for performance completed to date on these products, including a reasonable profit. For manufactured products
that meet these two criteria, we recognize revenue “over time”. This results in revenue recognition prior to the date
of shipment or title transfer for these products and increases the contract asset (unbilled receivables) balance with
a corresponding reduction in finished goods inventory on our balance sheet. Due to the recurring nature of our
sales of these customized products, the impact of ASC 606 is not expected to have a material impact on our
consolidated financial statements in future periods.
The transition adjustment resulted in revenue acceleration of $183.7 million with a corresponding acceleration
of cost of $133.4 million. The net increase to the opening balance of retained earnings was $43.5 million (net of tax
expense of $6.8 million) as of October 1, 2018 due to the cumulative impact of adopting the new revenue standard.
The adoption of ASC 606 had the following impact on our consolidated financial statements:
Consolidated Statements of Income
(In millions)
Net sales
Cost of goods sold
Income tax expense
Consolidated net income
Consolidated Balance Sheet
(In millions)
Inventories
Other current assets
Other current liabilities
Retained earnings
Consolidated Statement of Cash Flows
(In millions)
Consolidated net income
Other assets
Inventories
Income taxes
Disaggregated Revenue
As Reported
Year Ended September 30, 2019
Balances Without
Adoption of ASC 606
Impact of Adoption
Increase/(Decrease)
18,289.0 $
14,540.0 $
(276.8) $
867.9 $
18,297.7 $
14,555.4 $
(275.2) $
862.8 $
(8.7)
(15.4)
(1.6)
5.1
As Reported
September 30, 2019
Balances Without
Adoption of ASC 606
Impact of Adoption
Increase/(Decrease)
2,107.5 $
496.2 $
571.8 $
1,997.1 $
2,237.3 $
308.2 $
570.2 $
1,948.5 $
(129.8)
188.0
1.6
48.6
As Reported
Year Ended September 30, 2019
Balances Without
Adoption of ASC 606
Impact of Adoption
Increase/(Decrease)
867.9 $
(124.6) $
(110.5) $
7.2 $
862.8 $
(133.3) $
(95.1) $
5.6 $
5.1
8.7
(15.4)
1.6
$
$
$
$
$
$
$
$
$
$
$
$
ASC 606 requires that we disaggregate revenue from contracts with customers into categories that depict how
the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The table
below disaggregates our revenue by geographical market and product type (segment).
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WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In millions)
Primary Geographical Markets
North America
South America
Europe
Asia Pacific
Total (1)
Corrugated
Packaging
Year Ended September 30, 2019
Land and
Development
Consumer
Packaging
Intersegment
Sales
Total
$ 11,314.7 $
437.2
1.6
63.2
$ 11,816.7 $
5,166.6 $
73.2
1,064.7
301.5
6,606.0 $
23.4 $
—
—
—
23.4 $
(155.5) $ 16,349.2
510.4
1,066.2
363.2
(157.1) $ 18,289.0
—
(0.1)
(1.5)
(1) Net sales are attributed to geographical markets based on the location of the seller.
Revenue Contract Balances
Contract assets are rights to consideration in exchange for goods that we have transferred to a customer when
that right is conditional on something other than the passage of time. Contract assets are reduced when title and
risk of loss passes to the customer. Contract liabilities represent obligations to transfer goods or services to a
customer for which we have received consideration. Contract liabilities are reduced once control of the goods is
transferred to the customer.
The opening and closing balances of our contract assets and contract liabilities are as follows. Contract assets
and contract liabilities are aggregated within Other current assets and Other current liabilities, respectively, on the
consolidated balance sheet.
(In millions)
Beginning balance - October 1, 2018
Impact of acquisition
Ending balance - September 30, 2019
(Decrease) / increase
Contract Assets
(Short-Term)
Contract Liabilities
(Short-Term)
$
$
183.7
13.0
188.0
(8.7)
$
$
7.9
—
7.7
(0.2)
Performance Obligations and Significant Judgments
We primarily derive revenue from fixed consideration. Certain contracts may also include variable
consideration, typically in the form of cash discounts and volume rebates. If a contract with a customer includes
variable consideration, we estimate the expected cash discounts and other customer refunds based on historical
experience. We concluded this method is consistent with the most likely amount method under ASC 606 and
allows us to make the best estimate of the consideration we will be entitled to from customers.
Contracts or purchase orders with customers could include a single type of product or multiple types and
grades of products. Regardless, the contract price with the customer is agreed to at the individual product level
outlined in the customer contracts or purchase orders. Management has concluded that the prices negotiated with
each individual customer are representative of the stand-alone selling price of the product.
Practical Expedients and Exemptions
As permitted by ASC 606, we elected to use certain practical expedients in connection with our implementation
of ASC 606. We treat shipping and handling activities as fulfillment activities. We treat costs associated with
obtaining new contracts as expenses when incurred if the amortization period of the asset we would recognize is
one year or less. We do not record interest income when the difference in timing of control transfer and customer
payment is one year or less. The election of these practical expedients results in accounting treatments that we
believe are consistent with our historical accounting policies and, therefore, these elections of practical expedients
do not have a material impact on comparability of our financial statements.
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WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 3.
Acquisitions and Investment
We account for acquisitions in accordance with ASC 805, “Business Combinations”. The estimated fair values
of all assets acquired and liabilities assumed in acquisitions are provisional and may be revised as a result of
additional information obtained during the measurement period of up to one year from the acquisition date. No
changes in fiscal 2019 to our fiscal 2018 provisional fair value estimates of assets and liabilities assumed in
acquisitions were significant.
KapStone Acquisition
On November 2, 2018, pursuant to the Merger Agreement, dated as of January 28, 2018, among WRKCo Inc.
(formerly known as WestRock Company), KapStone, the Company (formerly known as Whiskey Holdco, Inc.),
Whiskey Merger Sub, Inc. and Kola Merger Sub, Inc., the Company acquired all of the outstanding shares of
KapStone through a transaction in which: (i) Whiskey Merger Sub, Inc. merged with and into WRKCo, with WRKCo
surviving such merger as a wholly owned subsidiary of Company and (ii) Kola Merger Sub, Inc. merged with and
into KapStone, with KapStone surviving such merger as a wholly owned subsidiary of the Company. Effective as of
the effective time of the KapStone Acquisition (the “Effective Time”), Whiskey Holdco, Inc. changed its name to
“WestRock Company” and WRKCo changed its name to “WRKCo Inc.”
KapStone is a leading North American producer and distributor of containerboard, corrugated products and
specialty papers, including liner and medium containerboard, kraft papers and saturating kraft. KapStone also
owns Victory Packaging, a packaging solutions distribution company with facilities in the U.S., Canada and Mexico.
We have included the financial results of KapStone in our Corrugated Packaging segment since the date of the
acquisition.
Pursuant to the KapStone Acquisition, at the Effective Time, (a) each issued and outstanding share of common
stock, par value $0.01 per share, of WRKCo was converted into one share of common stock, par value $0.01 per
share, of the Company (“Company common stock”) and (b) each issued and outstanding share of common
stock, par value $0.0001 per share, of KapStone (“KapStone common stock”) (other than shares of KapStone
common stock owned by (i) KapStone or any of its subsidiaries or (ii) any KapStone stockholder who properly
exercised appraisal rights with respect to its shares of KapStone common stock in accordance with Section 262 of
the Delaware General Corporation Law) was automatically canceled and converted into the right to receive (1)
$35.00 per share in cash, without interest (the “Cash Consideration”), or, at the election of the holder of such
share of KapStone common stock, (2) 0.4981 shares of Company common stock (the “Stock Consideration”) and
cash in lieu of fractional shares, subject to proration procedures designed to ensure that the Stock Consideration
would be received in respect of no more than 25% of the shares of KapStone common stock issued and
outstanding immediately prior to the Effective Time (the “Maximum Stock Amount”). Each share of KapStone
common stock in respect of which a valid election of Stock Consideration was not made by 5:00 p.m. New York
City time on September 5, 2018 was converted into the right to receive the Cash Consideration. KapStone
stockholders elected to receive Stock Consideration that was less than the Maximum Stock Amount and no
proration was required.
The consideration for the KapStone Acquisition was $4.9 billion including debt assumed, a long-term financing
obligation and assumed equity awards. As a result, KapStone stockholders received in the aggregate
approximately $3.3 billion in cash and 1.6 million shares of WestRock common stock with a value of $70.1 million,
or approximately 0.6% of the issued and outstanding shares of WestRock common stock immediately following the
Effective Time. Pursuant to the Merger Agreement, at the Effective Time, the Company assumed any outstanding
awards granted under the equity-based incentive plans of WRKCo and KapStone (including the shares underlying
such awards), the award agreements evidencing the grants of such awards and, in the case of the WRKCo equity-
based incentive plans, the remaining shares available for issuance under the applicable plan, in each case subject
to adjustments to such awards in the manner set forth in the Merger Agreement. Included in the consideration was
$70.8 million related to outstanding KapStone equity awards that were replaced with WestRock equity awards with
identical terms for pre-combination service. The amount related to post-combination service will be expensed over
the remaining service period of the awards. See “Note 21. Share-Based Compensation” for additional
information on the converted awards.
76
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the fair values of the assets acquired and liabilities assumed by major class of
assets and liabilities as of the acquisition date, as well as adjustments made during fiscal 2019 (referred to as
“measurement period adjustments”) (in millions):
Amounts
Recognized as of
the Acquisition
Date
Measurement
Period
Adjustments (1)
Cash and cash equivalents
Current assets, excluding cash and cash equivalents
Property, plant and equipment, net
Goodwill
Intangible assets
Other long-term assets
Total assets acquired
Current portion of debt
Current liabilities
Long-term debt due after one year
Accrued pension and other long-term benefits
Deferred income taxes
Other long-term liabilities
Total liabilities assumed
Net assets acquired
$
$
8.6
878.9
1,910.3
1,755.0
1,336.1
27.9
5,916.8
33.3
337.5
1,333.4
9.8
609.7
118.4
2,442.1
3,474.7
$
$
—
(18.7)
11.5
(13.8)
30.3
(0.1)
9.2
—
7.6
—
2.1
(2.9)
2.4
9.2
—
Amounts
Recognized as of
Acquisition Date
(as Adjusted) (2)
8.6
$
860.2
1,921.8
1,741.2
1,366.4
27.8
5,926.0
33.3
345.1
1,333.4
11.9
606.8
120.8
2,451.3
3,474.7
$
(1) The measurement period adjustments recorded in fiscal 2019 did not have a significant impact on our consolidated
statements of income for the year ended September 30, 2019.
(2) The measurement period adjustments were primarily due to refinements to third party appraisals and carrying amounts of
certain assets and liabilities, as well as adjustments to certain tax accounts based on, among other things, adjustments to
deferred tax liabilities. The net impact of the measurement period adjustments resulted in a net decrease to goodwill.
We are in the process of analyzing the estimated values of all assets acquired and liabilities assumed
including, among other things, finalizing third-party valuations of certain tangible and intangible assets, as well as
the fair value of certain contracts and the determination of certain tax balances; therefore, the allocation of the
purchase price is preliminary and subject to revision.
The fair value assigned to goodwill is primarily attributable to buyer-specific synergies expected to arise after
the acquisition (e.g., enhanced geographic reach of the combined organization, increased vertical integration and
other synergistic opportunities) and the assembled work force of KapStone, as well as from establishing deferred
tax liabilities for the assets and liabilities acquired. The goodwill and intangible assets resulting from the acquisition
will not be amortizable for tax purposes.
The following table summarizes the weighted average life and the fair value of intangible assets recognized in
the KapStone Acquisition, excluding goodwill (in millions):
Customer relationships
Trademarks and tradenames
Favorable contracts
Total
Weighted Avg.
Life
Amounts Recognized
as of the
Acquisition Date
11.7
16.9
6.0
11.9
$
$
1,303.0
54.2
9.2
1,366.4
77
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
None of the intangible assets have significant residual value. The intangible assets are expected to be
amortized over estimated useful lives ranging from one to 20 years based on the approximate pattern in which the
economic benefits are consumed or straight-line if the pattern was not reliably determinable.
Schlüter Acquisition
On September 4, 2018, we completed the Schlüter Acquisition to further enhance our pharmaceutical and
automotive platform and expand our geographical footprint in Europe to better serve our customers. In connection
with the Schlüter Acquisition, we paid cash of $50.6 million. The purchase consideration included the assumption
of $7.5 million of debt. We have included the financial results of the acquired operations in our Consumer
Packaging segment since the date of the acquisition.
The allocation of consideration primarily included $9.1 million of customer relationship intangible assets, $23.7
million of goodwill, $26.5 million of property, plant and equipment and $21.1 million of liabilities including deferred
taxes and the aforementioned debt. We are amortizing the customer relationship intangibles over 10.5 years based
on a straight-line basis because the amortization pattern was not reliably determinable. The fair value assigned to
goodwill is primarily attributable to buyer-specific synergies expected to arise after the acquisition (e.g., enhanced
reach of the combined organization and other synergies), and the assembled work force, as well as due to
establishing deferred tax liabilities for the difference between book and tax basis of the assets and liabilities
acquired. The goodwill and intangibles are not amortizable for income tax purposes.
Plymouth Packaging Acquisition
On January 5, 2018, we completed the Plymouth Packaging Acquisition to further enhance our platform and
drive differentiation and innovation. Plymouth’s “Box on Demand” systems are located on customers’ sites under
multi-year exclusive agreements and use fanfold corrugated to produce custom, on-demand corrugated packaging
that is accurately sized for any product type according to the customers’ specifications. We have fully integrated
the approximately 60,000 tons of containerboard used by Plymouth annually. The purchase price of $203.9 million,
net of cash received of $3.1 million. We have included the financial results of the acquired assets in our Corrugated
Packaging segment since the date of the acquisition.
The allocation of consideration primarily included $61.9 million of customer relationship intangible assets,
$59.6 million of goodwill, $36.2 million of property, plant and equipment, $26.2 million of other long-term assets
consisting of assets leased to customers and equity method investments, and $12.6 million of liabilities. We are
amortizing the customer relationship intangibles over 13.0 years based on a straight-line basis because the
amortization pattern was not reliably determinable. The fair value assigned to goodwill is primarily attributable to
buyer-specific synergies expected to arise after the acquisition (e.g., enhanced reach of the combined organization
and other synergies), and the assembled work force, as well as due to establishing deferred tax liabilities for the
difference between book and tax basis of the assets and liabilities acquired. The goodwill and intangibles are
amortizable for income tax purposes.
Grupo Gondi Investment
On April 1, 2016, we completed the formation of a joint venture with Grupo Gondi in Mexico. We contributed
$175.0 million in cash and the stock of an entity that owns three corrugated packaging facilities in Mexico in return
for a 25.0% ownership interest in the joint venture together with future put and call rights. The investment was
valued at approximately $0.3 billion. The majority equity holders manage the joint venture and we provide technical
and commercial resources and supply certain paperboard to the joint venture. We believe the joint venture is
helping to grow our presence in the attractive Mexican market. The joint venture operates paper machines,
corrugated packaging and high graphic folding carton facilities across various production sites. We have included
the financial results of the joint venture in our Corrugated Packaging segment since the date of the formation, and
are accounting for the investment under the equity method. On October 20, 2017, we increased our ownership
interest in Grupo Gondi from 27.0% to 32.3% through a $108 million capital contribution, which followed the joint
venture entity having a stock redemption from a minority partner in April 2017 that increased our ownership interest
to approximately 27.0%. The October 2017 capital contribution was used to support the joint venture’s capital
expansion plans, which include a containerboard mill and several converting plants. The agreement governing our
78
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
investment in Grupo Gondi includes future put and call rights with respect to the respective parties’ ownership
interest in the joint venture which can be exercised at various points in fiscal 2020 and beyond.
Hannapak Acquisition
On August 1, 2017, we completed the Hannapak Acquisition in a stock purchase. Hanna Group is one of
Australia’s leading providers of folding cartons to a variety of markets, including beverage, food, confectionery, and
healthcare. The purchase consideration for the Hannapak Acquisition was $60.4 million, net of cash received of
$0.6 million. We have included the financial results of the acquired operations since the date of the acquisition in
our Consumer Packaging segment.
The allocation of consideration primarily included $22.2 million of customer relationship intangible assets,
$24.0 million of goodwill, $9.8 million of property, plant and equipment and $13.7 million of liabilities including
deferred taxes. We are amortizing the customer relationship intangibles over 13 years based on a straight-line
basis because the amortization pattern was not reliably determinable. The fair value assigned to goodwill is
primarily attributable to buyer-specific synergies expected to arise after the acquisition (e.g., enhanced reach of the
combined organization and other synergies), and the assembled work force, as well as due to establishing
deferred tax liabilities for the difference between book and tax basis of the assets and liabilities acquired. The
goodwill and intangibles are not amortizable for income tax purposes.
Island Container Acquisition
On July 17, 2017, we completed the Island Container Acquisition in an asset purchase. The assets acquired
include a corrugator and corrugated converting operations located in Wheatley Heights, New York, and certain
related fulfillment assets located in Saddle Brook, New Jersey. The purchase consideration for the Island
Container Acquisition was $84.7 million, including a working capital settlement of $1.2 million paid in fiscal 2018.
We have included the financial results of the acquired assets since the date of the acquisition in our Corrugated
Packaging segment.
The allocation of consideration primarily included $43.0 million of customer relationship intangible assets,
$27.2 million of goodwill, $5.4 million of property, plant and equipment and $0.8 million of liabilities. We are
amortizing the customer relationship intangibles over 8.5 years based on a straight-line basis because the
amortization pattern was not reliably determinable. The fair value assigned to goodwill is primarily attributable to
buyer-specific synergies expected to arise after the acquisition (e.g., enhanced reach of the combined organization
and other synergies), and the assembled work force. The goodwill and intangibles are amortizable for income tax
purposes.
U.S. Corrugated Acquisition
On June 9, 2017, we completed the U.S. Corrugated Acquisition in a stock purchase. We acquired five
corrugated converting facilities in Ohio, Pennsylvania and Louisiana that provide a comprehensive suite of
products and services to customers in a variety of end markets, including food & beverage, pharmaceuticals and
consumer electronics. At the time of the transaction, we expected the acquisition to provide us the opportunity to
increase the vertical integration of our Corrugated Packaging segment by approximately 105,000 tons of
containerboard annually through the acquired facilities and another 50,000 tons under a long-term supply contract
with another company owned by the seller, and we have since completed the integration of these tons.
The purchase consideration was $193.7 million, net of cash received of $1.4 million and a $3.4 million working
capital settlement received in fiscal 2018. The consideration included the issuance of 2.4 million shares of
Common Stock valued at $136.1 million. We have included the financial results of U.S. Corrugated Holdings, Inc.
since the date of the acquisition in our Corrugated Packaging segment.
The allocation of consideration primarily included $77.8 million of customer relationship intangible assets,
$110.5 million of goodwill, $30.0 million of property, plant and equipment and $55.5 million of liabilities, including
deferred income taxes. We are amortizing the customer relationship intangibles over 7.5 years based on a straight-
line basis because the amortization pattern was not reliably determinable. The fair value assigned to goodwill is
primarily attributable to buyer-specific synergies expected to arise after the acquisition (e.g., enhanced reach of the
79
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
combined organization and other synergies), and the assembled work force, as well as due to establishing
deferred tax liabilities for the difference between book and tax basis of the assets and liabilities acquired. The
goodwill and intangibles are not amortizable for income tax purposes.
MPS Acquisition
On June 6, 2017, we completed the MPS Acquisition in a stock purchase. MPS is a global provider of print-
based specialty packaging solutions and its differentiated product offering includes premium folding cartons,
inserts, labels and rigid packaging. We acquired the outstanding shares of MPS for $18.00 per share in cash and
the assumption of debt.
In connection with the MPS Acquisition, we paid cash of $1,351.1 million, net of cash received of $47.5 million.
The purchase consideration included the assumption of $929.1 million of debt and $1.9 million related to MPS
equity awards that were replaced with WestRock equity awards with identical terms for the pre-acquisition service.
The amount related to post-acquisition service is being expensed over the remaining service period of the awards.
See “Note 21. Share-Based Compensation” for additional information on the converted awards. We have
included the financial results of MPS since the date of the acquisition in our Consumer Packaging segment.
The allocation of consideration primarily included $1,026.4 million of intangible assets, $900.9 million of
goodwill, $469.9 million of property, plant and equipment and $1,561.6 million of liabilities and noncontrolling
interests, including debt and deferred income taxes. The fair value assigned to goodwill is primarily attributable to
buyer-specific synergies expected to arise after the acquisition (e.g., enhanced reach of the combined organization
and other synergies), the assembled work force, as well as due to establishing deferred tax liabilities for the
difference between book and tax basis of the assets and liabilities acquired. The goodwill and intangibles are not
amortizable for income tax purposes.
The following table summarizes the weighted average life and the allocation to intangible assets recognized in
the MPS Acquisition, excluding goodwill (in millions):
Customer relationships
Trademarks and tradenames
Patents
Total
Weighted Avg.
Life
Amounts
Recognized as of
the Acquisition
Date
14.6
3.0
10.0
14.4
$
$
1,008.7
15.2
2.5
1,026.4
None of the intangibles has significant residual value. We are amortizing the customer relationship intangibles
over estimated useful lives ranging from 13 to 16 years based on a straight-line basis because the amortization
pattern was not reliably determinable.
Star Pizza Acquisition
On March 13, 2017, we completed the Star Pizza Acquisition. The transaction provided us with a leadership
position in the fast growing small-run pizza box market and has increased our vertical integration. The purchase
price was $34.6 million, net of a $0.7 million working capital settlement. We have fully integrated the approximately
22,000 tons of containerboard used by Star Pizza annually. We have included the financial results of the acquired
assets since the date of the acquisition in our Corrugated Packaging segment.
The purchase price allocation for the acquisition primarily included $24.8 million of customer relationship
intangible assets and $2.2 million of goodwill. We are amortizing the customer relationship intangibles over 10
years based on a straight-line basis because the amortization pattern was not reliably determinable. The fair value
assigned to goodwill is primarily attributable to buyer-specific synergies expected to arise after the acquisition (e.g.,
enhanced reach of the combined organization and other synergies), and the assembled work force. The goodwill
and intangibles are amortizable for income tax purposes.
80
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 4.
Restructuring and Other Costs
Summary of Restructuring and Other Initiatives
We recorded pre-tax restructuring and other costs of $173.7 million, $105.4 million and $196.7 million for fiscal
2019, 2018 and 2017, respectively. Of these costs, $56.5 million, $27.0 million and $86.6 million were non-cash for
fiscal 2019, 2018 and 2017, respectively. These amounts are not comparable since the timing and scope of the
individual actions associated with each restructuring, acquisition, divestiture or integration vary. We present our
restructuring and other costs in more detail below.
The following table summarizes our Restructuring and other costs for fiscal 2019, 2018 and 2017 (in millions):
Restructuring
Other
Restructuring and Other Costs
Restructuring
2019
2018
2017
$
$
111.0 $
62.7
173.7 $
39.5 $
65.9
105.4 $
113.4
83.3
196.7
Our restructuring charges are primarily associated with restructuring portions of our operations (i.e. partial or
complete plant closures), employee costs due to merger and acquisition-related workforce reductions and other
workforce reductions, including a voluntary retirement program in fiscal 2019. When we close a facility, if
necessary, we recognize a write-down to reduce the carrying value of equipment or other property to their
estimated fair value less cost to sell, and record charges for severance and other employee-related costs. Any
subsequent change in fair value less cost to sell prior to disposition is recognized as identified; however, no gain is
recognized in excess of the cumulative loss previously recorded unless the actual selling price exceeds the original
carrying value. At the time of each announced closure, we generally expect to record future period costs for
equipment relocation, facility carrying costs, costs to terminate a lease or contract before the end of its term and
employee-related costs.
Although specific circumstances vary, our strategy has generally been to consolidate our sales and operations
into large well-equipped plants that operate at high utilization rates and take advantage of available capacity
created by operational excellence initiatives and/or further optimize our system following mergers and acquisitions
or a changing business environment. Therefore, we generally transfer a substantial portion of each closed plant’s
assets and production to our other plants. We believe these actions have allowed us to more effectively manage
our business. In our Land and Development segment, the restructuring charges primarily consisted of severance
and other employee costs associated with the accelerated monetization strategy and wind-down of operations and
lease costs.
81
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
While restructuring costs are not charged to our segments and, therefore, do not reduce segment income, we
highlight the segment to which the charges relate. The following table presents a summary of restructuring charges
related to active restructuring initiatives that we incurred during the last three fiscal years, the cumulative recorded
amount since we started the initiative, and our estimate of the total we expect to incur (in millions):
Corrugated Packaging
Net property, plant and equipment costs
Severance and other employee costs
Equipment and inventory relocation costs
Facility carrying costs
Other costs
Restructuring total
Consumer Packaging
Net property, plant and equipment costs
Severance and other employee costs
Equipment and inventory relocation costs
Facility carrying costs
Other costs (1)
Restructuring total
Land and Development
Net property, plant and equipment costs
Severance and other employee costs
Other costs
Restructuring total
Corporate
Net property, plant and equipment costs
Severance and other employee costs
Other costs
Restructuring total
Total
Net property, plant and equipment costs
Severance and other employee costs
Equipment and inventory relocation costs
Facility carrying costs
Other costs
Restructuring total
2019
2018
2017
Cumulative
Total
Expected
$
$
$
$
$
$
$
$
$
$
32.1 $
16.9
4.8
3.9
1.2
58.9 $
0.5 $
6.0
1.0
0.2
4.3
12.0 $
— $
0.1
—
0.1 $
— $
37.5
2.5
40.0 $
2.9 $
1.9
3.4
3.3
0.1
11.6 $
6.8 $
6.9
2.4
0.9
2.0
19.0 $
— $
0.3
3.0
3.3 $
— $
0.8
4.8
5.6 $
1.5 $
5.8
2.2
5.4
(1.1)
13.8 $
28.2 $
23.9
2.5
0.7
20.1
75.4 $
1.8 $
2.8
—
4.6 $
0.1 $
14.8
4.7
19.6 $
32.6 $
60.5
5.8
4.1
8.0
111.0 $
9.7 $
9.9
5.8
4.2
9.9
39.5 $
31.6 $
47.3
4.7
6.1
23.7
113.4 $
230.1 $
59.3
12.5
32.7
14.5
349.1 $
40.4 $
39.4
6.3
2.2
26.4
114.7 $
1.8 $
13.8
3.0
18.6 $
1.4 $
138.2
18.1
157.7 $
273.7 $
250.7
18.8
34.9
62.0
640.1 $
230.1
59.4
14.2
33.8
21.2
358.7
40.4
39.4
6.3
2.2
26.4
114.7
1.8
13.8
3.0
18.6
1.4
138.2
18.1
157.7
273.7
250.8
20.5
36.0
68.7
649.7
(1)
Includes a $17.6 million impairment of a customer relationship intangible in fiscal 2017 related to an exited
product line.
We have defined “Net property, plant and equipment costs” as used in this Note 4 as property, plant and
equipment write-downs, subsequent adjustments to fair value for assets classified as held for sale, subsequent
(gains) or losses on sales of property, plant and equipment and related parts and supplies on such assets, if any.
Other Costs
Our other costs consist of acquisition, integration and divestiture costs. We incur costs when we acquire or
divest businesses. Acquisition costs include costs associated with transactions, whether consummated or not,
such as advisory, legal, accounting, valuation and other professional or consulting fees, as well as potential
litigation costs associated with those activities. We incur integration costs pre- and post-acquisition that reflect
work being performed to facilitate merger and acquisition integration, such as work associated with information
systems and other projects including spending to support future acquisitions, and primarily consist of professional
services and labor. Divestiture costs consist primarily of similar professional fees. The divestiture costs in fiscal
82
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2017 were primarily associated with costs incurred during the HH&B Sale process. We consider acquisition,
integration and divestiture costs to be Corporate costs regardless of the segment or segments involved in the
transaction.
The following table presents our acquisition, divestiture and integration costs that we incurred during the last
three fiscal years (in millions):
Acquisition costs
Integration costs
Divestiture costs
Other total
2019
2018
2017
$
$
28.2 $
34.3
0.2
62.7 $
38.2 $
27.4
0.3
65.9 $
27.1
46.4
9.8
83.3
The following table summarizes the changes in the restructuring accrual, which is primarily composed of lease
commitments, accrued severance and other employee costs, and a reconciliation of the restructuring accrual
charges to the line item “Restructuring and other costs” on our consolidated statements of income for the last
three fiscal years (in millions):
Accrual at beginning of fiscal year
Accruals acquired in acquisition
Additional accruals
Payments
Adjustment to accruals
Foreign currency rate changes
Accrual at end of fiscal year
2019
2018
2017
$
$
31.6 $
—
60.0
(55.9)
(3.2)
(0.2)
32.3 $
47.4 $
—
16.5
(29.8)
(1.0)
(1.5)
31.6 $
44.8
3.5
63.2
(53.3)
(10.8)
—
47.4
Reconciliation of accruals and charges to restructuring and other costs (in millions):
Additional accruals and adjustments to accruals
(see table above)
Acquisition costs
Integration costs
Divestiture costs
Net property, plant and equipment
Severance and other employee costs
Equipment and inventory relocation costs
Facility carrying costs
Other costs
Total restructuring and other costs, net
Note 5.
Retirement Plans
2019
2018
2017
$
$
56.8 $
28.2
34.3
0.2
32.6
6.8
5.8
4.1
4.9
173.7 $
15.5 $
38.2
22.0
0.3
9.7
1.3
5.8
4.2
8.4
105.4 $
52.4
27.1
41.2
9.8
31.6
3.8
4.7
6.1
20.0
196.7
We have defined benefit pension plans and other postretirement benefit plans for certain U.S. and non-U.S.
employees. Certain plans were frozen for salaried and non-union hourly employees at various times in the past,
although some employees meeting certain criteria are still accruing benefits. In addition, we participate in several
MEPPs that provide retirement benefits to certain union employees in accordance with various CBAs. We also
have supplemental executive retirement plans and other non-qualified defined benefit pension plans that provide
unfunded supplemental retirement benefits to certain of our current and former executives. The supplemental
executive retirement plans provide for incremental pension benefits in excess of those offered in the Plan. The
other postretirement benefit plans provide certain health care and life insurance benefits for certain salaried and
hourly employees who meet specified age and service requirements as defined by the plans.
83
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The benefits under our defined benefit pension plans are based on either compensation or a combination of
years of service and negotiated benefit levels, depending upon the plan. We allocate our pension assets to several
investment management firms across a variety of investment styles. Our defined benefit Investment Committee
meets at least four times a year with our investment advisors to review each management firm’s performance and
monitors its compliance with its stated goals, our investment policy and applicable regulatory requirements in the
U.S., Canada, and other jurisdictions.
Investment returns vary. We believe that, by investing in a variety of asset classes and utilizing multiple
investment management firms, we can create a portfolio that yields adequate returns with reduced volatility. Our
qualified U.S. plans employ a liability matching strategy augmented with Treasury futures to generally fully hedge
against interest rate risk. After we consulted with our actuary and investment advisors, we adopted the target
allocations in the table that follows for our pension plans to produce the desired performance. These target
allocations are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below
target ranges or modify the allocations.
Target Allocations
Equity investments
Fixed income investments
Short-term investments
Other investments
Total
U.S. Plans
Non-U.S. Plans
2019
2018
2019
2018
15%
75%
1%
9%
100%
15%
75%
1%
9%
100%
20%
72%
1%
7%
100%
22%
70%
1%
7%
100%
Our asset allocations by asset category at September 30 were as follows:
Equity investments
Fixed income investments
Short-term investments
Other investments
Total
U.S. Plans
Non-U.S. Plans
2019
2018
2019
2018
13%
70%
9%
8%
100%
14%
73%
3%
10%
100%
22%
71%
2%
5%
100%
23%
69%
2%
6%
100%
We manage our retirement plans in accordance with the provisions of the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations thereunder as well as applicable legislation in
Canada and other foreign countries. Our investment policy objectives include maximizing long-term returns at
acceptable risk levels, diversifying among asset classes, as applicable, and among investment managers, as well
as establishing certain risk parameters within asset classes. We have allocated our investments within the equity
and fixed income asset classes to sub-asset classes designed to meet these objectives. In addition, our other
investments support multi-strategy objectives.
In developing our weighted average expected rate of return on plan assets, we consulted with our investment
advisors and evaluated criteria based on historical returns by asset class and long-term return expectations by
asset class. We use a September 30 measurement date. We expect to contribute approximately $27 million to our
U.S. and non-U.S. pension plans in fiscal 2020. However, it is possible that our assumptions or legislation may
change, actual market performance may vary or we may decide to contribute a different amount. Therefore, the
amount we contribute may vary materially. The expense for MEPPs for collective bargaining employees generally
equals the contributions for these plans, excluding estimated accruals for withdrawal liabilities.
84
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The weighted average assumptions used to measure the benefit plan obligations at September 30, were:
Discount rate
Rate of compensation increase
Pension Plans
2019
2018
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
3.35%
3.00%
2.42%
2.65%
4.50%
3.00%
3.42%
2.67%
At September 30, 2019, the discount rate for the U.S. pension plans was determined based on the yield on a
theoretical portfolio of high-grade corporate bonds, and the discount rate for the non-U.S. plans was determined
based on a yield curve developed by our actuary. The theoretical portfolio of high-grade corporate bonds used to
select the September 30, 2019 discount rate for the U.S. pension plans includes bonds generally rated Aa- or
better with at least $100 million outstanding par value and bonds that are non-callable (unless the bonds possess a
“make whole” feature). The theoretical portfolio of bonds has cash flows that generally match our expected benefit
payments in future years.
Our assumption regarding the future rate of compensation increases is reviewed periodically and is based on
both our internal planning projections and recent history of actual compensation increases.
We typically review our expected long-term rate of return on plan assets periodically through an asset
allocation study with either our actuary or investment advisor. In fiscal 2020, our expected rate of return used to
determine net periodic benefit cost is 6.25% for our U.S. plans and 4.26% for our non-U.S. plans. Our expected
rates of return in fiscal 2020 are based on an analysis of our long-term expected rate of return and our current
asset allocation.
During the second quarter of fiscal 2017, our year-to-date lump sum payments to certain beneficiaries of the
Plan, together with several one-time severance benefit payments out of the Plan, triggered pension settlement
accounting and a remeasurement of the Plan as of February 28, 2017. As a result of settlement accounting, we
recognized as a current period expense a pro-rata portion of the unamortized net actuarial loss, after
remeasurement, and recorded a $28.7 million non-cash charge to our earnings in the second quarter of 2017. The
lump sum payments were to certain eligible former employees who were not currently receiving a monthly benefit.
Eligible former employees whose present value of future pension benefits exceeded a certain minimum threshold
had the option to either voluntarily accept lump sum payments or to not accept the offer and continue to be entitled
to their monthly benefit upon retirement. Lump sum and one-time severance benefits payments of $203.7 million
were made out of existing assets of the Plan in the first half of fiscal 2017. The discount rate used in the plan
remeasurement was 4.49%, an increase from 4.04% for the Plan at September 30, 2016. The expected long-term
rate of return on plan assets was unchanged. As a result of the February 28, 2017 remeasurement, the funded
status of the Plan increased by $73.2 million as compared to September 30, 2016. The increase in the funded
status was primarily due to a reduction in the plan obligations due to the increase in the discount rate. In the
second half of fiscal 2017, we made $ 27.1 million in lump sum payments to certain beneficiaries of the Plan,
resulting in total fiscal 2017 lump sum payments of $230.8 million and a total fiscal 2017 non-cash charge to our
earnings of $32.6 million.
In October 2014, we entered into a master agreement with the USW that applied to substantially all of our
legacy RockTenn facilities represented by the USW at that time. The agreement has a six year term and covers a
number of specific items, including wages, medical coverage and certain other benefit programs, substance abuse
testing and successorship. Individual facilities will continue to have local agreements for subjects not covered by
the master agreement and those agreements will continue to have staggered terms, and, it now covers many
former MeadWestvaco, KapStone and other facilities acquired. WestRock and the USW are currently re-
negotiating a successor agreement to the original master agreement.
85
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table shows the changes in benefit obligation, plan assets and funded status for the years ended
September 30 (in millions):
Change in projected benefit obligation:
Benefit obligation at beginning of fiscal year
Service cost
Interest cost
Amendments
Actuarial loss (gain)
Plan participant contributions
Benefits paid
Business combinations
Curtailments
Settlements
Foreign currency rate changes
Benefit obligation at end of fiscal year
Change in plan assets:
Fair value of plan assets at beginning of fiscal year
Actual gain (loss) on plan assets
Employer contributions
Plan participant contributions
Benefits paid
Business combinations
Settlements
Foreign currency rate changes
Fair value of plan assets at end of fiscal year
Funded status
Amounts recognized in the consolidated balance sheet:
Prepaid pension asset
Other current liabilities
Pension liabilities, net of current portion
(Under) over funded status at end of fiscal year
Pension Plans
2019
2018
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
$
$
$
$
$
$
$
3,783.5 $
36.0
189.2
0.4
694.4
—
(216.8)
561.2
1.0
—
—
5,048.9 $
3,921.2 $
731.7
13.0
—
(216.8)
556.2
—
—
5,005.3 $
(43.6) $
1,340.2 $
6.8
43.4
3.1
181.0
2.2
(78.3)
0.7
—
(1.7)
(54.3)
1,443.1 $
1,350.2 $
172.9
12.1
2.2
(78.3)
—
(1.7)
(56.5)
1,400.9 $
(42.2) $
3,941.9 $
36.7
157.7
9.3
(186.8)
—
(175.3)
—
—
—
—
3,783.5 $
4,107.9 $
(24.9)
13.5
—
(175.3)
—
—
—
3,921.2 $
137.7 $
1,502.2
8.0
46.9
—
(90.3)
2.5
(82.8)
3.5
(0.7)
(5.5)
(43.6)
1,340.2
1,414.7
39.9
24.2
2.5
(82.8)
0.7
(5.5)
(43.5)
1,350.2
10.0
143.3 $
(14.6)
(172.3)
(43.6) $
81.4 $
(1.9)
(121.7)
(42.2) $
305.7 $
(10.1)
(157.9)
137.7 $
114.3
(0.9)
(103.4)
10.0
Certain U.S. plans have benefit obligations in excess of plan assets. These plans, which consist primarily of
non-qualified plans, have aggregate projected benefit obligations of $220.9 million, aggregate accumulated benefit
obligations of $220.1 million, and aggregate fair value of plan assets of $34.0 million at September 30, 2019. Our
qualified U.S. plans were in a net overfunded position at September 30, 2019.
The accumulated benefit obligation of U.S. and non-U.S. pension plans was $6,438.9 million and $5,081.3
million at September 30, 2019 and 2018, respectively.
86
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The pre-tax amounts in accumulated other comprehensive loss at September 30 not yet recognized as
components of net periodic pension cost, including noncontrolling interest, consist of (in millions):
Pension Plans
2019
2018
Net actuarial loss
Prior service cost
Total accumulated other comprehensive loss
U.S. Plans
$
854.7 $
27.6
882.3 $
$
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
168.8 $
3.4
172.2 $
631.2 $
32.3
663.5 $
105.6
0.3
105.9
The pre-tax amounts recognized in other comprehensive loss (income), including noncontrolling interest, are
as follows at September 30 (in millions):
Net actuarial loss (gain) arising during period
Amortization and settlement recognition of net actuarial loss
Prior service cost arising during period
Amortization of prior service cost
Net other comprehensive loss (income) recognized
$
$
312.0 $
(25.3)
3.5
(5.2)
285.0 $
38.7 $
(20.6)
9.3
(4.7)
22.7 $
(48.8)
(57.7)
3.4
(4.1)
(107.2)
2019
Pension Plans
2018
2017
The net periodic pension (income) cost recognized in the consolidated statements of income is comprised of
the following for fiscal years ended (in millions):
Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial loss
Amortization of prior service cost
Curtailment loss (gain)
Settlement (gain) loss
Special termination benefits
Company defined benefit plan (income) expense
Multiemployer and other plans
Net pension (income) cost
2019
Pension Plans
2018
2017
$
$
42.8 $
232.6
(340.2)
24.5
5.2
1.0
(0.2)
—
(34.3)
1.4
(32.9) $
44.8 $
204.6
(328.4)
21.2
4.7
(0.6)
(0.5)
—
(54.2)
1.4
(52.8) $
45.1
197.8
(313.1)
25.4
4.1
—
32.7
12.5
4.5
4.7
9.2
The Multiemployer and other plans line in the table above excludes the estimated withdrawal liabilities recorded
in fiscal 2018 and adjustments recorded to such liabilities in fiscal 2019. See “Note 5. Retirement Plans —
Multiemployer Plans” for additional information. The fiscal 2017 special termination benefits were recorded to
restructuring and other costs in connection with the Combination and are excluded from the calculation of pension
and other postretirement funding (more) than expense (income) in our consolidated statements of cash flows.
The Consolidated Statements of Income line item “Pension and other postretirement non-service income” is
equal to the non-service elements of our “Company defined benefit plan (income) expense” and our “Net
postretirement cost” outlined in this note excluding special termination benefits (recorded in restructuring and other
costs in connection with the Combination).
87
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Weighted-average assumptions used in the calculation of benefit plan expense for fiscal years ended:
Discount rate
Rate of compensation increase
Expected long-term rate of return on
plan assets
2019
Pension Plans
2018
2017
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
4.50%
3.00%
3.42%
2.67%
4.09%
3.00%
3.26%
2.65%
4.30%
3.00%
3.08%
3.09%
6.50%
4.69%
6.50%
4.98%
6.50%
6.03%
In fiscal 2019, 2018 and 2017, for our U.S. pension and postretirement plans, we considered the mortality
tables published by the Society of Actuaries (“SOA”) and evaluated our mortality experience to establish mortality
assumptions. Based on our experience and in consultation with our actuaries, in fiscal 2019 we utilized the base
Pri-2012 mortality tables from the SOA’s May 2019 exposure draft with specific gender and job classification
increases and applied an improvement scale with generational improvements that is generally based on Social
Security Administration analysis and assumptions. The increases for fiscal 2019 were 8% for white collar males,
12% for blue collar males, 10% for white collar females, and 6% for blue collar females. Separate tables specific to
contingent annuitants as provided in the SOA’s Pri-2012 exposure draft were used for beneficiaries without any
specific increases applied. In fiscal 2018 and 2017, we utilized the SOA’s base RP-2014 mortality tables with
specific gender and job classification increases. The increases for fiscal 2018 were 10% for white collar males,
14% for blue collar males, 11% for white collar females, and 10% for blue collar females. The increases for fiscal
2017 were 9% for white collar males, 12% for blue collar males, 11% for white collar females, and 9% for blue
collar females. In fiscal 2018 and 2017 our Canadian pension and postretirement plans utilized the 2014 Private
Sector Canadian Pensioners Mortality Table adjusted to reflect industry and our mortality experience and applied
Canadian Pensioner’s Mortality Improvement Scale B with generational improvements. For fiscal 2019, the
adjustments applied to the mortality rates under the 2014 Private Sector Canadian Pensioners Mortality Table
were modified to reflect a wider set of factors pertaining to our population, in addition to industry and collar
designation, such as pension amount and lifestyle factors.
The estimated losses that will be amortized from accumulated other comprehensive loss into net periodic
benefit cost in fiscal 2020 are as follows (in millions):
Pension Plans
Actuarial loss
Prior service cost
Total
$
$
U.S. Plans
Non-U.S. Plans
8.9
0.3
9.2
38.5 $
5.2
43.7 $
Our projected estimated benefit payments (unaudited), which reflect expected future service, as appropriate,
are as follows (in millions):
Pension Plans
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal Years 2025 – 2029
$
$
$
$
$
$
88
U.S. Plans
Non-U.S. Plans
75.9
74.5
74.6
74.8
74.3
369.0
253.1 $
262.3 $
266.5 $
273.3 $
268.8 $
1,405.3 $
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes our pension plan assets measured at fair value on a recurring basis (at least
annually) as of September 30, 2019 (in millions):
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Total
Equity securities:
U.S. equities (1)
Non-U.S. equities (1)
Fixed income securities:
$
184.2 $
6.5
U.S. government securities (2)
Non-U.S. government securities (3)
U.S. corporate bonds (3)
Non-U.S. corporate bonds (3)
Other fixed income (4)
Short-term investments (5)
Benefit plan assets measured in the fair value hierarchy
Assets measured at NAV (6)
Total benefit plan assets
$
$
598.2
125.6
2,156.0
432.9
379.3
468.7
4,351.4 $
2,054.8
6,406.2
183.5 $
6.5
—
0.2
137.6
5.7
10.8
468.7
813.0 $
0.7
—
598.2
125.4
2,018.4
427.2
368.5
—
3,538.4
The following table summarizes our pension plan assets measured at fair value on a recurring basis (at least
annually) as of September 30, 2018 (in millions):
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Total
Equity securities:
U.S. equities (1)
Non-U.S. equities (1)
Fixed income securities:
$
165.5 $
8.2
U.S. government securities (2)
Non-U.S. government securities (3)
U.S. corporate bonds (3)
Non-U.S. corporate bonds (3)
Other fixed income (4)
Short-term investments (5)
Benefit plan assets measured in the fair value hierarchy
Assets measured at NAV (6)
Total benefit plan assets
$
$
435.8
127.5
1,493.6
380.8
319.4
149.0
3,079.8 $
2,191.6
5,271.4
165.5 $
8.2
—
—
108.4
49.3
—
149.0
480.4 $
—
—
435.8
127.5
1,385.2
331.5
319.4
—
2,599.4
(1) Equity securities are comprised of the following investment types: (i) common stock, (ii) preferred stock and (iii) equity
exchange traded funds. Level 1 investments in common and preferred stocks and exchange traded funds are valued using
quoted market prices multiplied by the number of shares owned.
(2) U.S. government securities include treasury and agency debt. These investments are valued using broker quotes in an
active market.
89
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(3) The level 1 non-U.S. government securities investment is an exchange cleared swap valued using quoted market prices.
The level 1 U.S. corporate bonds category is primarily comprised of U.S. dollar denominated investment grade securities
and valued using quoted market prices. Level 2 investments are valued utilizing a market approach that includes various
valuation techniques and sources such as value generation models, broker quotes in active and non-active markets,
benchmark yields and securities, reported trades, issuer spreads, and/or other applicable reference data.
(4) Other fixed income is comprised of municipal and asset-backed securities. Investments are valued utilizing a market
approach that includes various valuation techniques and sources, such as broker quotes in active and non-active markets,
benchmark yields and securities, reported trades, issuer spreads and/or other applicable reference data.
(5) Short-term investments are valued at $1.00/unit, which approximates fair value. Amounts are generally invested in interest-
bearing accounts.
(6)
Investments that are measured at net asset value (“NAV”) (or its equivalent) as a practical expedient have not been
classified in the fair value hierarchy.
The following table summarizes assets measured at fair value based on NAV per share as a practical
expedient as of September 30, 2019 and 2018 (in millions):
September 30, 2019
Hedge funds (1)
Commingled funds, private equity, private real
estate investments, and equity related
investments (2)
Fixed income and fixed income related
instruments (3)
September 30, 2018
Hedge funds (1)
Commingled funds, private equity, private real
estate investments, and equity related
investments (2)
Fixed income and fixed income related
instruments (3)
Fair value
Redemption
Frequency
Redemption
Notice Period
Unfunded
Commitments
$
42.9 Monthly
Up to 30 days $
—
1,188.6 Monthly
Up to 60 days
113.1
823.3 Monthly
$
2,054.8
Up to 10 days
$
—
113.1
$
47.9 Monthly
Up to 30 days $
—
1,092.9 Monthly
Up to 60 days
1,050.8 Monthly
2,191.6
Up to 10 days
$
$
75.3
—
75.3
(1) Hedge fund investments are primarily made through shares of limited partnerships or similar structures. Hedge funds are
typically valued monthly by third-party administrators that have been appointed by the funds’ general partners. Hedge
funds have been valued using NAV as a practical expedient.
(2) Commingled fund investments are valued at the NAV per share multiplied by the number of shares held. The determination
of NAV for the commingled funds includes market pricing of the underlying assets as well as broker quotes and other
valuation techniques. Commingled funds have been valued using NAV as a practical expedient.
(3) Fixed income and fixed income related instruments consist of commingled debt funds, which are valued at their NAV per
share multiplied by the number of shares held. The determination of NAV for the commingled funds includes market pricing
of the underlying assets as well as broker quotes and other valuation techniques. Commingled debt funds have been
valued using NAV as a practical expedient.
We maintain holdings in certain private equity partnerships and private real estate investments for which a
liquid secondary market does not exist. The private equity partnerships are commingled investments. Valuation
techniques, such as discounted cash flow and market based comparable analyses, are used to determine fair
value of the private equity investments. Unobservable inputs used for the discounted cash flow technique include
projected future cash flows and the discount rate used to calculate present value. Unobservable inputs used for the
market-based comparisons technique include earnings before interest, taxes, depreciation and amortization
multiples in other comparable third-party transactions, price to earnings ratios, liquidity, current operating results,
as well as input from general partners and other pertinent information. Private equity investments have been
valued using NAV as a practical expedient.
90
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Private real estate investments are commingled investments. Valuation techniques, such as discounted cash
flow and market based comparable analyses, are used to determine fair value of the private equity investments.
Unobservable inputs used for the discounted cash flow technique include projected future cash flows and the
discount rate used to calculate present value. Unobservable inputs used for the market-based comparison
technique include a combination of third party appraisals, replacement cost, and comparable market prices.
Private real estate investments have been valued using NAV as a practical expedient.
Equity-related investments are hedged equity investments in a commingled fund that consist primarily of equity
indexed investments which are hedged by options and also hold collateral in the form of short term treasury
securities. Equity related investments have been valued using NAV as a practical expedient.
Postretirement Plans
The postretirement benefit plans provide certain health care and life insurance benefits for certain salaried and
hourly employees who meet specified age and service requirements as defined by the plans.
The weighted average assumptions used to measure the benefit plan obligations at September 30 were:
Discount rate
Postretirement plans
2019
2018
U.S.
Plans
Non-
U.S. Plans
U.S.
Plans
Non-
U.S. Plans
3.34%
5.64%
4.50%
6.61%
The following table shows the changes in benefit obligation, plan assets and funded status for the fiscal years
ended September 30 (in millions):
Change in projected benefit obligation:
Benefit obligation at beginning of fiscal year
Service cost
Interest cost
Amendments
Actuarial loss (gain)
Benefits paid
Business combinations
Curtailments
Foreign currency rate changes
Benefit obligation at end of fiscal year
Change in plan assets:
Fair value of plan assets at beginning of fiscal year
Employer contributions
Plan participant contributions
Benefits paid
Fair value of plan assets at end of fiscal year
Funded Status
Amounts recognized in the consolidated balance sheet:
Other current liabilities
Postretirement benefit liabilities, net of current portion
Under funded status at end of fiscal year
$
$
$
$
$
$
$
91
Postretirement Plans
2019
2018
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
91.0 $
0.7
4.1
0.4
1.6
(6.6)
7.1
—
—
98.3 $
— $
6.6
—
(6.6)
— $
(98.3) $
55.5 $
0.5
3.6
—
22.2
(2.9)
—
—
(3.2)
75.7 $
98.1 $
0.7
3.9
(1.4)
(2.5)
(7.8)
—
—
—
91.0 $
— $
2.9
—
(2.9)
— $
(75.7) $
— $
7.8
—
(7.8)
— $
(91.0) $
(8.9) $
(89.4)
(98.3) $
(3.0) $
(72.7)
(75.7) $
(8.8) $
(82.2)
(91.0) $
68.1
0.8
4.0
—
(5.2)
(2.6)
—
(2.1)
(7.5)
55.5
—
2.6
—
(2.6)
—
(55.5)
(2.9)
(52.6)
(55.5)
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The pre-tax amounts in accumulated other comprehensive loss at September 30 not yet recognized as
components of net periodic postretirement cost, including noncontrolling interest, consist of (in millions):
Postretirement Plans
2019
2018
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
Net actuarial (gain) loss
Prior service credit
Total accumulated other comprehensive (income) loss
$
$
(8.0) $
(8.3)
(16.3) $
18.8 $
(0.9)
17.9 $
(11.2) $
(11.3)
(22.5) $
(3.8)
(1.0)
(4.8)
The pre-tax amounts recognized in other comprehensive loss (income), including noncontrolling interest, are
as follows at September 30 (in millions):
Net actuarial loss (gain) arising during period
Amortization and settlement recognition of net actuarial
gain (loss)
Prior service cost (credit) arising during period
Amortization or curtailment recognition of prior service credit
Net other comprehensive loss (income) recognized
$
23.9 $
(9.7) $
2.0
0.4
2.8
29.1 $
(0.3)
(1.5)
4.4
(7.1) $
$
14.7
1.3
(4.4)
4.5
16.1
Postretirement Plans
2018
2017
2019
The net periodic postretirement cost recognized in the consolidated statements of income is comprised of the
following for fiscal years ended (in millions):
Service cost
Interest cost
Amortization of net actuarial (gain) loss
Amortization of prior service credit
Curtailment gain
Net postretirement cost
Postretirement Plans
2018
2017
2019
$
$
1.2 $
7.7
(2.0)
(2.8)
—
4.1 $
1.5 $
7.9
0.3
(4.4)
(0.1)
5.2 $
0.9
7.4
(1.3)
(4.5)
(0.3)
2.2
The assumed health care cost trend rates used in measuring the accumulated postretirement benefit
obligation (“APBO”) are as follows at September 30, 2019:
U.S. Plans
Health care cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate
trend rate)
Year the rate reaches the ultimate trend rate
Non-U.S. Plans
Health care cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate
trend rate)
Year the rate reaches the ultimate trend rate
5.87%
4.42%
2037
5.91%
5.91%
2019
As of September 30, 2019, the effect of a 1% change in the assumed health care cost trend rate would
increase the APBO by approximately $12 million or decrease the APBO by approximately $10 million, and would
92
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
increase the annual net periodic postretirement benefit cost for fiscal 2019 by $1 million or decrease the annual net
periodic postretirement benefit cost for fiscal 2019 by approximately $1 million.
Weighted-average assumptions used in the calculation of benefit plan expense for fiscal years ended:
Discount rate
Rate of compensation increase
2019
Postretirement Plans
2018
2017
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
4.50%
N/A
6.61%
N/A
4.09%
N/A
6.51%
7.37%
4.04%
N/A
6.64%
3.14%
The estimated gains that will be amortized from accumulated other comprehensive loss into net periodic
benefit cost in fiscal 2020 are as follows (in millions):
Postretirement Plans
Actuarial gain
Prior service credit
Total
$
$
U.S. Plans
Non-U.S. Plans
(0.7)
0.2
(0.5)
(1.4) $
(2.6)
(4.0) $
Our projected estimated benefit payments (unaudited), which reflect expected future service, as appropriate,
are as follows (in millions):
Postretirement Plans
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal Years 2025 – 2029
Multiemployer Plans
$
$
$
$
$
$
U.S. Plans
Non-U.S. Plans
2.9
3.0
3.1
3.2
3.3
17.8
9.4 $
8.2 $
7.8 $
7.4 $
7.0 $
30.8 $
We participate in several MEPPs that provide retirement benefits to certain union employees in accordance
with various CBAs. The risks of participating in MEPPs are different from the risks of participating in single-
employer pension plans. These risks include:
•
•
•
assets contributed to a MEPP by one employer are used to provide benefits to employees of all
participating employers,
if a participating employer withdraws from a MEPP, the unfunded obligations of the MEPP allocable to
such withdrawing employer may be borne by the remaining participating employers, and
if we withdraw from a MEPP, we may be required to pay that plan an amount based on our allocable share
of the unfunded vested benefits of the plan, referred to as a withdrawal liability, as well as a share of the
MEPP’s accumulated funding deficiency.
Our contributions to a particular MEPP are established by the applicable CBAs; however, our required
contributions may increase based on the funded status of a MEPP and legal requirements, such as those set forth
in the Pension Act, which requires substantially underfunded MEPPs to implement a FIP or a RP to improve their
funded status. Factors that could impact the funded status of a MEPP include, without limitation, investment
performance, changes in participant demographics, decline in the number of contributing employers, changes in
actuarial assumptions and the utilization of extended amortization provisions. We believe that certain of the
MEPPs in which we participate or have participated, including the PIUMPF, have material unfunded vested
benefits. The Pension Act established three categories, or “zones”, for the funded status of plans. Among other
factors, plans in the green zone are at least 80% funded and are designated as healthy, plans in the yellow zone
are greater than 65% but less than 80% funded and are designated as endangered and plans in the red zone are
93
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
generally less than 65% funded and are designated as critical or critical and declining. Each plan’s actuary must
certify the plan status annually. Several of the MEPPs in which we participate or have participated, including
PIUMPF, have been certified in the red zone for critical and declining.
A FIP or RP requires a particular MEPP to adopt measures to correct its underfunded status. These measures
may include, but are not limited to, an increase in our contribution rate from that provided in the applicable CBA, a
reallocation of the contributions already being made by participating employers for various benefits to individuals
participating in the MEPP, and/or a reduction in the benefits to be paid to future and/or current retirees. In addition,
the Pension Act requires that a 5% surcharge be levied on employer contributions for the first year commencing
shortly after the date the employer receives notice that the MEPP is certified in the red zone and a 10% surcharge
on each succeeding year until a CBA is in place with terms and conditions consistent with the RP. On January 1,
2016, the surcharge we paid for PIUMPF increased from 10% to 15%.
In the normal course of business, we evaluate our potential exposure to MEPPs, including with respect to
potential withdrawal liabilities. During fiscal 2018, we submitted formal notification to withdraw from PIUMPF and
recorded an estimated withdrawal liability of $180.0 million. The estimated withdrawal liability assumes payment
over 20 years, discounted at a credit adjusted risk-free rate of 3.83%, and that PIUMPF’s demand related to the
withdrawal would include both a payment for withdrawal liability and for our proportionate share of PIUMPF’s
accumulated funding deficiency. The estimated withdrawal liability noted above excludes the potential impact of a
future mass withdrawal of other employers from PIUMPF, which is not considered probable or reasonably
estimable at this time. Due to the absence of specific information regarding matters such as PIUMPF’s current
financial situation, our estimate is subject to revision. In fiscal 2019, we revised our estimate of the withdrawal
liability, the impact of which was not significant.
In addition, in fiscal 2018, we submitted formal notification to withdraw from Central States and recorded an
estimated withdrawal liability of $4.2 million on a discounted basis. It is reasonably possible that we may incur
withdrawal liabilities with respect to certain other MEPPs in connection with such withdrawals. Our estimate of any
such withdrawal liability, both individually and in the aggregate, is not material for the remaining plans in which we
participate.
In September 2019, we received a demand from PIUMPF asserting that we owe $170.3 million on an
undiscounted basis (approximately $0.7 million per month for the next 20 years) with respect to our withdrawal
liability. The demand did not address any assertion of liability for PIUMPF’s accumulated funding deficiency. In
October 2019, we received two additional demand letters from PIUMPF related to a subsidiary asserting that we
owe $2.3 million on an undiscounted basis to be paid over 20 years with respect to the subsidiary’s withdrawal
liability and $2.0 million for its accumulated funding deficiency. We are evaluating each of these demands. We
expect to challenge the accumulated funding deficiency. We expect to begin making monthly payments for these
withdrawal liabilities in fiscal 2020.
At September 30, 2019 and September 30, 2018, we had withdrawal liabilities recorded of $237.2 million and
$247.8 million, respectively. The impact of future withdrawal liabilities, future funding obligations or increased
contributions may be material to our results of operations, cash flows and financial condition and the trading price
of our Common Stock.
Approximately 46% of our employees are covered by CBAs in the U.S. and Canada, of which approximately
17% are covered by CBAs that expire within one year and another 4% are covered by CBAs that have expired.
94
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table lists our participation in our multiemployer and other plans that are individually significant
for the years ended September 30 (in millions):
Pension Fund
U.S. Multiemployer plans:
Pace Industry Union-Management
Pension Fund (2)
Other Funds (3)
Total Contributions:
EIN /
Pension
Plan Number
Pension Act
Zone Status
2019 2018
FIP / RP
Status
Pending /
Implemented
Contributions (1)
2019 2018 2017
11-6166763 /
001
Red Red Implemented $
$
— $
1.4
1.4 $
0.9 $
0.5
1.4 $
3.5
1.6
5.1
Surcharge
imposed?
Expiration
CBA
Yes
9/30/20 to
6/25/23
(1) Contributions represent the amounts contributed to the plan during the fiscal year.
(2)
In fiscal 2019 and 2018, our contributions did not exceed 5% of total plan contributions due to our withdrawal from
PIUMPF. In fiscal 2017, we did exceed 5% of total plan contributions.
(3) One additional MEPP in which we participate have been certified as critical and declining.
Defined Contribution Plans
We have 401(k) and other defined contribution plans that cover certain of our U.S., Canadian and other non-
U.S. salaried union and nonunion hourly employees, generally subject to an initial waiting period. The 401(k) and
other defined contribution plans permit participants to make contributions by salary reduction pursuant to
Section 401(k) of the Internal Revenue Code, or the taxing authority in the jurisdiction in which they operate. Due
primarily to acquisitions, CBAs and other non-U.S. defined contribution programs, we have plans with varied terms.
At September 30, 2019, our contributions may be up to 7.5% for U.S. salaried and non-union hourly employees,
consisting of a match of up to 5% and an automatic employer contribution of 2.5%. Certain other employees who
receive accruals under a defined benefit pension plan, certain employees covered by CBAs and non-U.S. defined
contribution programs receive generally up to a 3.0% to 4.0% contribution to their 401(k) plan or defined
contribution plan. During fiscal 2019, 2018 and 2017, we recorded expense of $150.9 million, $113.7 million and
$104.1 million, respectively, related to matching contributions to the 401(k) plans and other defined contribution
plans, including the automatic employer contribution.
Supplemental Retirement Plans
We have Supplemental Plans that are nonqualified deferred compensation plans. We intend to provide
participants with an opportunity to supplement their retirement income through deferral of current compensation.
Amounts deferred and payable under the Supplemental Plans are our unsecured obligations and rank equally with
our other unsecured and unsubordinated indebtedness outstanding. Participants’ accounts are credited with
investment gains and losses under the Supplemental Plans in accordance with the participant’s investment
election or elections (or default election or elections) as in effect from time to time. At September 30, 2019, the
Supplemental Plans had assets totaling $173.0 million that are recorded at market value, and liabilities of $181.9
million. The investment alternatives available under the Supplemental Plans are generally similar to investment
alternatives available under 401(k) plans. The amount of expense we recorded for the current fiscal year and the
preceding two fiscal years was not significant.
Note 6.
Income Taxes
The components of income before income taxes are as follows (in millions):
United States
Foreign
Income before income taxes
Year Ended September 30,
2018
2017
2019
$
$
891.6 $
253.1
1,144.7 $
736.7 $
298.1
1,034.8 $
481.9
375.7
857.6
95
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Impacts of the Tax Act
On December 22, 2017, the U.S. enacted comprehensive tax legislation, commonly referred to as the Tax Act,
which made broad and complex changes to the tax code. In conjunction with guidance set forth under SAB 118
pertaining to the Tax Act, we recorded provisional amounts both for the impact of remeasurement on its U.S. net
deferred tax liabilities to the new U.S. statutory rate of 21% and for the mandatory transition tax on unrepatriated
foreign earnings during fiscal 2018. During the first quarter of fiscal 2019, we completed the accounting for the
income tax effect related to the Tax Act and made the following adjustments to the provisional amounts: (i) a $0.4
million tax expense from the true up and revaluation of deferred tax assets and liabilities to reflect the new tax rate
and (ii) an additional $3.7 million tax expense, as a result of the refinement to the transition tax provisional liability.
We have reclassified the transition tax liability for financial statement purposes to a reserve for uncertain tax
position due to uncertainty in the realizability of certain foreign earnings and profits deficits.
For fiscal 2019, we are subject to several provisions of the Tax Act, including computations under Global
Intangible Low Taxed Income (“GILTI”), Foreign Derived Intangible Income (“FDII”), Base Erosion and Anti-Abuse
Tax (“BEAT”), and IRC Section 163(j) interest limitation (“Interest Limitation”) rules. We recorded the immaterial
tax impact of GILTI, FDII and Interest Limitation computations in our effective tax rate for fiscal 2019. For the BEAT
computation, we have not recorded any amount in our effective tax rate for fiscal 2019 because we estimate that
this provision of the Tax Act will not impact tax expense for the fiscal year.
As part of the enacted Tax Act, GILTI provisions were introduced that would impose a tax on foreign income in
excess of a deemed return on tangible assets of foreign corporations. In January 2018, the FASB issued a
question-and-answer document, stating that either accounting for deferred taxes related to GILTI inclusions or
treating any taxes on GILTI inclusions as period costs are both acceptable methods subject to an accounting policy
election. The GILTI provisions did not take effect for WestRock until fiscal 2019, and the Company has elected to
treat any potential GILTI inclusions as a period cost during the year incurred.
Income tax expense (benefit) consists of the following components (in millions):
Current income taxes:
Federal
State
Foreign
Total current expense
Deferred income taxes:
Federal
State
Foreign
Total deferred expense (benefit)
Total income tax expense (benefit)
Year Ended September 30,
2018
2017
2019
$
$
134.7 $
34.9
69.5
239.1
44.1
6.1
(12.5)
37.7
276.8 $
83.0 $
26.8
86.6
196.4
(1,108.6)
53.2
(15.5)
(1,070.9)
(874.5) $
80.8
3.3
95.3
179.4
15.2
(22.8)
(12.8)
(20.4)
159.0
96
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The differences between the statutory federal income tax rate and our effective income tax rate are as follows:
Statutory federal tax rate
Foreign rate differential
Adjustment and resolution of federal, state and foreign tax
uncertainties
State taxes, net of federal benefit
Tax Act (1)
Excess tax benefit related to stock compensation
Research and development and other tax credits, net of
valuation allowances and reserves
Income attributable to noncontrolling interest
Domestic manufacturer’s deduction
Sale of HH&B
U.S. legal entity restructuring
Change in valuation allowance
Nondeductible transaction costs
Nontaxable increased cash surrender value
Withholding taxes
Brazilian net worth deduction
Other, net
Effective tax rate
Year Ended September 30,
2018
2019
2017
21.0%
1.3
1.2
2.5
—
(0.3)
(0.7)
(0.1)
—
—
—
0.2
1.0
(0.6)
0.6
(0.9)
(1.0)
24.2%
24.5%
0.6
35.0%
(4.9)
0.9
4.3
(109.1)
(0.8)
(0.5)
(0.1)
(1.8)
—
—
(1.8)
—
(0.8)
0.5
(0.9)
0.5
(84.5)%
(0.3)
3.3
—
—
(0.8)
0.4
(2.0)
(5.0)
(3.3)
(3.3)
1.0
(1.5)
0.4
(0.8)
0.3
18.5%
(1) For the year ended September 30, 2018, the primary components are a $1,215.9 million benefit from the remeasurement
of our net U.S. deferred tax liability and a one-time transition tax liability of $95.4 million or $87.1 million net of the release
of a previously recorded outside basis difference.
The tax effects of temporary differences that give rise to deferred income tax assets and liabilities consist of
the following (in millions):
Deferred income tax assets:
Accruals and allowances
Employee related accruals and allowances
Pension
State net operating loss carryforwards
State credit carryforwards, net of federal benefit
U.S. and foreign tax credit carryforwards
Federal and foreign net operating loss carryforwards
Restricted stock and options
Other
Total
Deferred income tax liabilities:
Property, plant and equipment
Deductible intangibles and goodwill
Inventory reserves
Deferred gain
Pension obligations
Basis difference in joint ventures
Total
Valuation allowances
Net deferred income tax liability
97
September 30,
2019
2018
$
$
10.7
221.2
0.7
57.6
69.5
0.7
173.5
39.3
52.1
625.3
1,840.5
914.7
188.3
275.2
—
33.1
3,251.8
218.0
2,844.5
$
$
22.1
213.2
—
78.4
64.8
14.7
188.7
46.7
45.3
673.9
1,509.7
698.1
168.6
258.8
60.1
35.5
2,730.8
229.4
2,286.3
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Deferred taxes are recorded as follows in the consolidated balance sheet (in millions):
Long-term deferred tax asset (1)
Long-term deferred tax liability
Net deferred income tax liability
September 30,
2019
2018
$
$
33.5 $
2,878.0
2,844.5 $
35.2
2,321.5
2,286.3
(1) The long-term deferred tax asset is presented in Other assets on the consolidated balance sheets.
At September 30, 2019 and September 30, 2018, we had gross U.S. federal net operating losses of
approximately $4.0 million and $13.3 million, respectively. These loss carryforwards generally expire between
fiscal 2031 and 2038.
At September 30, 2019 we had no alternative minimum tax credits outstanding. Under current tax law, the
alternative minimum tax credit carryforwards became refundable tax credits which we fully utilized. At
September 30, 2018, we had alternative minimum tax credits of $14.7 million. We had no research and
development tax credits and general business credit carryforwards at September 30, 2019.
At September 30, 2019 and September 30, 2018, we had gross state and local net operating losses, of
approximately $1,638 million and $1,676 million, respectively. These loss carryforwards generally expire between
fiscal 2021 and 2039. The tax effected values of these net operating losses are $57.6 million and $78.4 million at
September 30, 2019 and 2018, respectively, exclusive of valuation allowances of $10.2 million and $7.8 million at
September 30, 2019 and 2018, respectively.
At September 30, 2019 and September 30, 2018, gross net operating losses for foreign reporting purposes of
approximately $663.2 million and $698.4 million, respectively, were available for carryforward. A majority of these
loss carryforwards generally expire between fiscal 2021 and 2039, while a portion have an indefinite carryforward.
The tax effected values of these net operating losses are $172.5 million and $185.8 million at September 30, 2019
and 2018, respectively, exclusive of valuation allowances of $144.1 million and $161.5 million at September 30,
2019 and 2018, respectively.
At September 30, 2019 and 2018, we had state tax credit carryforwards of $69.5 million and $64.8 million,
respectively. These state tax credit carryforwards generally expire within 5 to 10 years; however, certain state
credits can be carried forward indefinitely. Valuation allowances of $56.8 million and $56.1 million at
September 30, 2019 and 2018, respectively, have been provided on these assets. These valuation allowances
have been recorded due to uncertainty regarding our ability to generate sufficient taxable income in the appropriate
taxing jurisdiction.
The following table represents a summary of the valuation allowances against deferred tax assets for fiscal
2019, 2018 and 2017 (in millions):
Balance at beginning of fiscal year
Increases
Allowances related to purchase accounting (1)
Reductions
Balance at end of fiscal year
2019
2018
2017
$
$
229.4 $
25.4
0.8
(37.6)
218.0 $
219.1 $
50.8
0.1
(40.6)
229.4 $
177.2
54.3
12.4
(24.8)
219.1
(1) Amounts in fiscal 2019 relate to the KapStone Acquisition. Amounts in fiscal 2018 and 2017 relate to the MPS Acquisition.
98
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Consistent with prior years, we consider a portion of our earnings from certain foreign subsidiaries as subject
to repatriation and we provide for taxes accordingly. However, we consider the unremitted earnings and all other
outside basis differences from all other foreign subsidiaries to be indefinitely reinvested. Accordingly, we have not
provided for any taxes that would be due.
As of September 30, 2019, we estimate our outside basis difference in foreign subsidiaries that are considered
indefinitely reinvested to be approximately $1.6 billion. The components of the outside basis difference are
comprised of purchase accounting adjustments, undistributed earnings, and equity components. Except for the
portion of our earnings from certain foreign subsidiaries where we provided for taxes, we have not provided for any
taxes that would be due upon the reversal of the outside basis differences. However, in the event of a distribution
in the form of dividends or dispositions of the subsidiaries, we may be subject to incremental U.S. income taxes,
subject to an adjustment for foreign tax credits, and withholding taxes or income taxes payable to the foreign
jurisdictions. As of September 30, 2019, the determination of the amount of unrecognized deferred tax liability
related to any remaining undistributed foreign earnings not subject to the Transition Tax and additional outside
basis differences is not practicable.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in
millions):
Balance at beginning of fiscal year
Additions related to purchase accounting (1)
Additions for tax positions taken in current year (2)
Additions for tax positions taken in prior fiscal years
Reductions for tax positions taken in prior fiscal years
Reductions due to settlement (3)
(Reductions) additions for currency translation adjustments
Reductions as a result of a lapse of the applicable statute of
limitations
Balance at end of fiscal year
2019
2018
2017
$
$
127.1 $
1.0
103.8
1.8
(0.5)
(4.0)
(1.7)
(3.2)
224.3 $
148.9 $
3.4
3.1
18.0
(5.3)
(29.4)
(9.6)
(2.0)
127.1 $
166.8
7.7
5.0
15.2
(25.6)
(14.1)
2.0
(8.1)
148.9
(1) Amounts in fiscal 2019 relate to the KapStone Acquisition. Amounts in fiscal 2018 and 2017 relate to the MPS Acquisition.
(2) Additions for tax positions taken in current fiscal year includes primarily positions taken related to foreign subsidiaries.
(3) Amounts in fiscal 2019 relate to the settlements of state and foreign audit examinations. Amounts in fiscal 2018 relate to
the settlement of state audit examinations and federal and state amended returns filed related to affirmative adjustments
for which there was a reserve. Amounts in fiscal 2017 relate to the settlement of federal and state audit examinations with
taxing authorities.
As of September 30, 2019 and 2018, the total amount of unrecognized tax benefits was approximately $224.3
million and $127.1 million, respectively, exclusive of interest and penalties. Of these balances, as of September 30,
2019 and 2018, if we were to prevail on all unrecognized tax benefits recorded, approximately $207.5 million and
$108.7 million, respectively, would benefit the effective tax rate. We regularly evaluate, assess and adjust the
related liabilities in light of changing facts and circumstances, which could cause the effective tax rate to fluctuate
from period to period. Resolution of the uncertain tax positions could have a material adverse effect on our cash
flows or materially benefit our results of operations in future periods depending upon their ultimate resolution. See
“Note 18. Commitments and Contingencies — Brazil Tax Liability”
We recognize estimated interest and penalties related to unrecognized tax benefits in income tax expense in
the consolidated statements of income. As of September 30, 2019, we had liabilities of $80.0 million related to
estimated interest and penalties for unrecognized tax benefits. As of September 30, 2018, we had liabilities of
$70.4 million, related to estimated interest and penalties for unrecognized tax benefits. Our results of operations for
the fiscal year ended September 30, 2019, 2018 and 2017 include expense of $9.7 million, $5.8 million and $7.4
million, respectively, net of indirect benefits, related to estimated interest and penalties with respect to the liability
for unrecognized tax benefits. As of September 30, 2019, it is reasonably possible that our unrecognized tax
benefits will decrease by up to $8.7 million in the next twelve months due to expiration of various statues of
limitations and settlement of issues.
99
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We file federal, state and local income tax returns in the U.S. and various foreign jurisdictions. With few
exceptions, we are no longer subject to U.S. federal and state and local income tax examinations by tax authorities
for years prior to fiscal 2016 and fiscal 2009, respectively. We are no longer subject to non-U.S. income tax
examinations by tax authorities for years prior to fiscal 2012, except for Brazil for which we are not subject to tax
examinations for years prior to 2006. While we believe our tax positions are appropriate, they are subject to audit
or other modifications and there can be no assurance that any modifications will not materially and adversely affect
our results of operations, financial condition or cash flows.
Note 7.
Segment Information
Effective in the first quarter of fiscal 2019, we aligned our financial results for all periods presented to move our
merchandising displays operations from our Consumer Packaging segment to our Corrugated Packaging segment
and to allocate certain previously non-allocated costs and certain pension and other postretirement non-service
income (expense) to our reportable segments. Separately, in the first quarter of fiscal 2019, we began conducting
our recycling operations primarily as a procurement function. Since then, recycling net sales have not been
recorded and the margin from these operations has reduced cost of goods sold. Following the realignment, we
report our financial results of operations in the following three reportable segments: Corrugated Packaging, which
consists of our containerboard mills, corrugated packaging and distribution operations, as well as our
merchandising displays and recycling procurement operations; Consumer Packaging, which consists of our
consumer mills, food and beverage and partition operations; and Land and Development, which sells real estate,
primarily in the Charleston, SC region. Prior to the HH&B Sale, our Consumer Packaging segment included HH&B.
Certain income and expenses are not allocated to our segments and, thus, the information that management uses
to make operating decisions and assess performance does not reflect such amounts. Items not allocated are
reported as non-allocated expenses or in other line items in the table below after segment income.
Some of our operations included in the segments are located in locations such as Canada, Mexico, South
America, Europe, Asia and Australia. The table below reflects financial data of our foreign operations for each of
the past three fiscal years, some of which were transacted in U.S. dollars (in millions, except percentages):
Years Ended September 30,
2018
2019
2017
Foreign net sales to unaffiliated customers
Foreign segment income
Foreign long-lived assets
$
$
$
3,332.4
392.3
1,466.4
$
$
$
3,236.7
360.7
1,400.2
$
$
$
2,621.2
260.1
1,558.3
Foreign operations as a percent of consolidated operations:
Foreign net sales to unaffiliated customers
Foreign segment income
Foreign long-lived assets
18.2%
21.9%
13.1%
19.9%
21.1%
15.4%
17.6%
21.4%
17.1%
We evaluate performance and allocate resources based, in part, on profit from operations before income
taxes, interest and other items. The accounting policies of the reportable segments are the same as those
described in “Note 1. Description of Business and Summary of Significant Accounting Policies”. We account
for intersegment sales at prices that approximate market prices. For segment reporting purposes, we include our
equity in income of unconsolidated entities in segment income, as well as our investments in unconsolidated
entities in segment identifiable assets. Equity in income of unconsolidated entities is not material and we disclose
our investments in unconsolidated entities below.
100
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table shows selected operating data for our segments (in millions):
Years Ended September 30,
2018
2019
2017
Net sales (aggregate):
Corrugated Packaging
Consumer Packaging
Land and Development
Total
Less net sales (intersegment):
Corrugated Packaging
Consumer Packaging
Total
Net sales (unaffiliated customers):
Corrugated Packaging
Consumer Packaging
Land and Development
Total
Segment income:
Corrugated Packaging
Consumer Packaging
Land and Development
Segment income
Gain on sale of certain closed facilities
Multiemployer pension withdrawal income (expense)
Pension lump sum settlement
Land and Development impairments
Restructuring and other costs
Non-allocated expenses
Interest expense, net
Loss (gain) on extinguishment of debt
Other income, net
Gain on sale of HH&B
Income before income taxes
$
$
$
$
$
$
$
$
11,816.7
6,606.0
23.4
18,446.1
75.3
81.8
157.1
11,741.4
6,524.2
23.4
18,289.0
1,399.6
388.1
2.5
1,790.2
52.6
6.3
—
(13.0)
(173.7)
(83.7)
(431.3)
(5.1)
2.4
—
1,144.7
$
$
$
$
$
$
$
$
9,693.0
6,617.5
142.4
16,452.9
87.3
80.5
167.8
9,605.7
6,537.0
142.4
16,285.1
1,240.0
445.1
22.5
1,707.6
—
(184.2)
—
(31.9)
(105.4)
(70.1)
(293.8)
(0.1)
12.7
—
1,034.8
$
$
$
$
$
$
$
$
9,084.8
5,698.3
243.8
15,026.9
78.8
88.4
167.2
9,006.0
5,609.9
243.8
14,859.7
818.0
385.7
13.8
1,217.5
—
—
(32.6)
(46.7)
(196.7)
(67.5)
(222.5)
1.8
11.5
192.8
857.6
In October 2018, our containerboard and pulp mill located in Panama City, FL sustained extensive damage
from Hurricane Michael. In fiscal 2019, we received $180.0 million of insurance proceeds that were recorded as a
reduction of cost of goods sold in our Corrugated Packaging segment. The insurance proceeds consisted of $55.3
million for business interruption recoveries and $124.7 million for direct costs and property damage. Our
consolidated statements of cash flow in fiscal 2019 included $154.5 million in net cash provided by operating
activities and $25.5 million in net cash used for investing activities.
Segment income in fiscal 2019, 2018 and 2017 was reduced by $24.7 million, $1.0 million and $26.5 million,
respectively, of expense for inventory stepped-up in purchase accounting, net of related LIFO impact. The
Corrugated Packaging segment income in fiscal 2019 was reduced by $24.7 million. Corrugated Packaging
segment income in fiscal 2018 was reduced by $1.0 million. Corrugated Packaging segment income and
Consumer Packaging segment income in fiscal 2017 were reduced by $1.4 million and $25.1 million, respectively.
101
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table shows selected operating data for our segments (in millions):
Years Ended September 30,
2018
2019
2017
Identifiable assets:
Corrugated Packaging
Consumer Packaging
Land and Development
Assets held for sale
Corporate
Total
Goodwill:
Corrugated Packaging
Consumer Packaging
Total
Intangibles, net:
Corrugated Packaging
Consumer Packaging
Total
Depreciation and amortization:
Corrugated Packaging
Consumer Packaging
Land and Development
Corporate
Total
Capital expenditures:
Corrugated Packaging
Consumer Packaging
Corporate
Total
Investment in unconsolidated entities:
Corrugated Packaging
Consumer Packaging
Land and Development
Corporate
Total
$
$
$
$
$
$
$
$
$
$
$
$
16,681.1 $
11,038.7
28.3
25.8
2,382.8
30,156.7 $
11,069.6 $
11,511.1
49.1
59.5
2,671.2
25,360.5 $
10,959.7
11,455.8
89.8
173.6
2,410.1
25,089.0
3,695.0 $
3,590.6
7,285.6 $
1,966.7 $
3,610.9
5,577.6 $
1,941.5
3,586.8
5,528.3
1,655.1 $
2,404.4
4,059.5 $
506.2 $
2,615.8
3,122.0 $
540.4
2,788.9
3,329.3
950.6 $
552.1
—
8.5
1,511.2 $
700.5 $
546.5
0.7
4.5
1,252.2 $
622.1
484.9
0.7
4.4
1,112.1
961.4 $
365.9
41.8
1,369.1 $
457.1 $
11.6
—
0.4
469.1 $
657.3 $
308.3
34.3
999.9 $
455.6 $
1.8
—
0.4
457.8 $
503.9
254.0
20.7
778.6
342.8
3.0
14.4
0.4
360.6
The Corrugated Packaging segment’s investment in unconsolidated entities primarily relates to the Grupo
Gondi investment. The investment in Grupo Gondi that is included in the Corrugated Packaging segment’s
investment in unconsolidated entities in fiscal 2019 and 2018 exceeds our proportionate share of the underlying
equity in net assets by approximately $121.4 million and $133.9 million, respectively. Approximately $53.1 million
and $62.1 million remains amortizable to expense in equity in income of unconsolidated entities over the estimated
life of the underlying assets ranging from 10 to 15 years beginning with our investment in fiscal 2016. The Gondi
investment is denominated in Mexican Pesos. See “Note 3. Acquisitions and Investment” for information
regarding changes in our equity participation in the Grupo Gondi joint venture.
102
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The changes in the carrying amount of goodwill for the fiscal years ended September 30, 2019, 2018 and 2017
are as follows (in millions):
Balance as of October 1, 2016
Goodwill
Accumulated impairment losses
Goodwill acquired
Goodwill disposed of
Purchase price allocation adjustments
Translation adjustments
Balance as of September 30, 2017
Goodwill
Accumulated impairment losses
Goodwill acquired
Goodwill disposed of
Purchase price allocation adjustments
Translation adjustments
Balance as of September 30, 2018
Goodwill
Accumulated impairment losses
Goodwill acquired
Purchase price allocation adjustments
Translation and other adjustments
Balance as of September 30, 2019
Goodwill
Accumulated impairment losses
Corrugated
Packaging
Consumer
Packaging
Total
$
1,798.4 $
(0.1)
1,798.3
137.6
—
(1.2)
6.8
1,941.6
(0.1)
1,941.5
65.4
(4.2)
2.3
(38.3)
1,966.8
(0.1)
1,966.7
1,746.4
0.9
(19.0)
3,022.5 $
(42.7)
2,979.8
907.8
(329.6)
9.3
19.5
3,629.5
(42.7)
3,586.8
23.8
—
18.4
(18.1)
3,653.6
(42.7)
3,610.9
3.8
(1.4)
(22.7)
3,695.1
(0.1)
3,695.0 $
3,633.3
(42.7)
3,590.6 $
$
4,820.9
(42.8)
4,778.1
1,045.4
(329.6)
8.1
26.3
5,571.1
(42.8)
5,528.3
89.2
(4.2)
20.7
(56.4)
5,620.4
(42.8)
5,577.6
1,750.2
(0.5)
(41.7)
7,328.4
(42.8)
7,285.6
The goodwill acquired in fiscal 2019 primarily related to the KapStone Acquisition in the Corrugated Packaging
segment. The goodwill acquired in fiscal 2018 primarily related to the Plymouth Packaging Acquisition in the
Corrugated Packaging segment and the Schlüter Acquisition in the Consumer Packaging segment. The purchase
price adjustments to goodwill in fiscal 2018 primarily related to the MPS Acquisition and the Hannapak Acquisition.
The goodwill acquired in fiscal 2017 related to the MPS Acquisition and the Hannapak Acquisition in the Consumer
Packaging segment and the U.S. Corrugated Acquisition, the Island Container Acquisition and the Star Pizza
Acquisition in the Corrugated Packaging segment. The goodwill disposed of in the Corrugated Packaging segment
in fiscal 2018 related to the sale of our solid waste management brokerage services business. The goodwill
disposed of in the Consumer Packaging segment in fiscal 2017 was primarily related to the HH&B Sale. See “Note
3. Acquisitions and Investment” for additional information.
103
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 8.
Inventories
Inventories are as follows (in millions):
Finished goods and work in process
Raw materials
Supplies and spare parts
Inventories at FIFO cost
LIFO reserve
Net inventories
September 30,
2019
2018
$
$
$
938.9
818.8
479.7
2,237.4
(129.9)
$
2,107.5
867.0
730.0
368.2
1,965.2
(135.6)
1,829.6
It is impracticable to segregate the LIFO reserve between raw materials, finished goods and work in process.
In fiscal 2019 and 2018, we reduced inventory quantities in some of our LIFO pools. These reductions result in
liquidations of LIFO inventory quantities generally carried at lower costs prevailing in prior years as compared with
the cost of the purchases in the respective fiscal years, the effect of which typically decreases cost of goods sold.
The impact of the liquidations in fiscal 2019 and 2018 was not significant. In fiscal 2017, we had no LIFO layer
liquidations.
Note 9.
Assets Held For Sale
Due to the accelerated monetization strategy, our Land and Development portfolio has met the held for sale
criteria and is classified as assets held for sale. Assets held for sale at September 30, 2019 of $25.8 million include
$16.1 million of Land and Development portfolio assets, with the remainder primarily related to closed facilities.
Assets held for sale at September 30, 2018 of $59.5 million include $33.5 million of Land and Development
portfolio assets, with the remainder primarily related to closed facilities.
Note 10. Property, Plant and Equipment
Property, plant and equipment consists of the following (in millions):
Property, plant and equipment at cost:
Land and buildings
Machinery and equipment
Forestlands and mineral rights
Transportation equipment
Leasehold improvements
Less: accumulated depreciation, depletion and amortization
Property, plant and equipment, net
September 30,
2019
2018
$
$
$
2,442.3
14,743.6
144.0
31.2
100.2
17,461.3
(6,271.8)
$
11,189.5
2,078.9
12,064.0
158.0
30.1
88.9
14,419.9
(5,337.4)
9,082.5
Depreciation expense for fiscal 2019, 2018 and 2017 was $1,074.6 million, $923.8 million and $855.9 million,
respectively.
104
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 11. Other Intangible Assets
The gross carrying amount and accumulated amortization relating to intangible assets, excluding goodwill, are
as follows (in millions, except weighted avg. life):
September 30,
2019
2018
Weighted
Avg. Life
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Customer relationships
Trademarks and tradenames
Favorable contracts
Technology and patents
License costs
Non-compete agreements
Other
Total
15.3 $
20.0
10.1
11.4
9.0
2.0
29.5
15.3 $
5,395.5 $
129.9
57.0
39.2
25.7
3.4
3.6
5,654.3 $
(1,452.1) $
(55.3)
(42.6)
(21.2)
(20.5)
(2.9)
(0.2)
(1,594.8) $
Accumulated
Amortization
(1,079.8)
(43.9)
(34.8)
(18.0)
(18.1)
(1.7)
—
(1,196.3)
4,123.7 $
77.6
47.8
41.2
24.6
3.4
—
4,318.3 $
Estimated intangible asset amortization expense for the succeeding five fiscal years is as follows (in millions):
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
$
$
$
$
$
404.2
356.4
348.9
342.7
322.3
Intangible amortization expense was $408.0 million, $300.8 million and $234.0 million during fiscal 2019, 2018
and 2017, respectively. We had other intangible amortization expense, primarily for packaging equipment leased
to customers of $28.6 million, $27.6 million and $22.2 million during fiscal 2019, 2018 and 2017, respectively.
Note 12. Fair Value
Assets and Liabilities Measured or Disclosed at Fair Value
We estimate fair values in accordance with ASC 820 “Fair Value Measurement”. ASC 820 provides a
framework for measuring fair value and expands disclosures required about fair value measurements. Specifically,
ASC 820 sets forth a definition of fair value and a hierarchy prioritizing the inputs to valuation techniques. ASC 820
defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in the
principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. Additionally, ASC 820 defines levels within the hierarchy based on the
availability of quoted prices for identical items in active markets, similar items in active or inactive markets and
valuation techniques using observable and unobservable inputs. We incorporate credit valuation adjustments to
reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in our fair value
measurements.
We disclose the fair value of our long-term debt in “Note 13. Debt” and the fair value of our pension and
postretirement assets and liabilities in “Note 5. Retirement Plans”. We have, or from time to time may have,
financial instruments recognized at fair value including Supplemental Plans, interest rate derivatives, commodity
derivatives or other similar classes of assets or liabilities, the fair value of which are not significant. See “Note 1 —
Description of Business and Summary of Significant Accounting Policies — Fair Value of Financial
Instruments and Nonfinancial Assets and Liabilities” for additional information.
105
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Accounts Receivable Sales Agreement
On September 25, 2018 we entered into a $550.0 million agreement (the “A/R Sales Agreement”) to sell to a
third party financial institution all of the short-term receivables generated from certain customer trade accounts. On
September 19, 2019 we amended the A/R Sales Agreement and increased the purchase limit to $650.0 million.
The A/R Sales Agreement has a one year term and may be terminated early by either party. The terms of the A/R
Sales Agreement limit the balance of receivables sold to the amount available to fund such receivables sold and
eliminated the receivable for proceeds from the financial institution at any transfer date. Transfers under the A/R
Sales Agreement meet the requirements to be accounted for as sales in accordance with guidance in ASC 860,
“Transfers and Servicing”. These customers are not included in the Receivables Securitization Facility that is
discussed in “Note 13. Debt”.
In connection with the September 25, 2018 termination of the prior agreement and execution of the A/R Sales
Agreement, there was a non-cash transaction of $424.8 million representing the repurchase of receivables
previously sold to the financial institution under the prior agreement and the sale of the same receivables to the
financial institution under the A/R Sales Agreement.
The following table represents a summary of the activity under the A/R Sales Agreement for fiscal 2019 and
2018 (in millions):
Receivable from financial institution at beginning of fiscal year
Receivables sold to the financial institution and derecognized
Receivables collected by financial institution
Cash proceeds from financial institution
Receivable from financial institution at September 30,
2019
2018
$
$
— $
2,051.6
(1,971.1)
(80.5)
— $
24.9
1,664.0
(1,573.8)
(115.1)
—
Cash proceeds related to the receivables sold are included in cash from operating activities in the consolidated
statement of cash flows in the accounts receivable line item. The expense recorded in connection with the sale is
currently approximately $17 million per year and is recorded in “other income, net” in the consolidated statements
of income. The future amount may fluctuate based on the level of activity and other factors. Although the sales are
made without recourse, we maintain continuing involvement with the sold receivables as we provide collections
services related to the transferred assets. The associated servicing liability is not material given the high quality of
the customers underlying the receivables and the anticipated short collection period.
Financial Instruments not Recognized at Fair Value
Financial instruments not recognized at fair value on a recurring or nonrecurring basis include cash and cash
equivalents, accounts receivable, certain other current assets, short-term debt, accounts payable, certain other
current liabilities and long-term debt. With the exception of long-term debt, the carrying amounts of these financial
instruments approximate their fair values due to their short maturities. See “Note 13. Debt” for the fair value of our
long-term debt.
Fair Value of Nonfinancial Assets and Nonfinancial Liabilities
We measure certain nonfinancial assets and nonfinancial liabilities at fair value on a nonrecurring basis. These
assets and liabilities include cost and equity method investments when they are deemed to be other-than-
temporarily impaired, assets acquired and liabilities assumed in a merger, an acquisition or in a nonmonetary
exchange, and property, plant and equipment and intangible assets that are written down to fair value when they
are held for sale or determined to be impaired. See “Note 4. Restructuring and Other Costs” for impairments
associated with restructuring activities including the impairment of a paper machine at our Charleston, SC mill
included in the Corrugated Packaging segment and other such similar items presented as “net property, plant and
equipment costs”. During fiscal 2019, 2018 and 2017, we did not have any significant non-restructuring
nonfinancial assets or nonfinancial liabilities that were measured at fair value on a nonrecurring basis in periods
subsequent to initial recognition other than the following pre-tax non-cash impairments: (i) the $13.0 million pre-tax
non-cash impairment of certain mineral rights in fiscal 2019 following the termination of a third party leasing
106
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
relationship, (ii) the $31.9 million impairment of certain mineral rights and real estate in fiscal 2018, (iii) the $46.7
million real estate impairment recorded in fiscal 2017, and (iv) a $17.6 million write-down of a customer relationship
intangible in fiscal 2017 related to an exited product line. The $23.6 million impairment of mineral rights in fiscal
2018 was driven by the non-renewal of a lease and associated with declining oil and gas prices, and the other $8.3
million recorded to write-down the carrying value on real estate projects in connection with the accelerated
monetization strategy in our Land and Development segment where the projected sales proceeds were less than
the carrying value.
Note 13. Debt
The public bonds issued by WRKCo Inc. (“WRKCo”), WestRock RKT, LLC (“RKT”) and MWV are guaranteed
by WestRock and have cross-guarantees between the three companies. The industrial development bonds
associated with the capital lease obligations of MWV are guaranteed by the Company or its subsidiaries. The
public bonds are unsecured, unsubordinated obligations that rank equally in right of payment with all of our existing
and future unsecured, unsubordinated obligations. The bonds are effectively subordinated to any of our existing
and future secured debt to the extent of the value of the assets securing such debt. At September 30, 2019, all of
our debt was unsecured with the exception of our Receivables Securitization Facility (as defined below) and capital
lease obligations.
The following were individual components of debt (in millions, except percentages):
September 30, 2019
September 30, 2018
Carrying
Value
Weighted Avg
Interest Rate
Carrying
Value
Weighted Avg
Interest Rate
Public bonds due fiscal 2019 to 2022
Public bonds due fiscal 2023 to 2028
Public bonds due fiscal 2029 to 2033
Public bonds due fiscal 2037 to 2047
Term loan facilities
Revolving credit and swing facilities
Commercial paper
Capital lease obligations
Supplier financing and commercial card
programs
International and other debt
Total debt
Less: current portion of debt
Long-term debt due after one year
$
507.8
3,769.1
2,197.6
179.0
2,295.5
396.0
339.2
185.8
123.2
70.2
10,063.4
561.1
9,502.3
$
4.9% $
4.0%
4.9%
6.2%
3.3%
2.9%
2.4%
4.3%
N/A
6.6%
4.0%
$
1,470.9
2,534.4
964.1
178.5
599.4
355.0
—
171.0
105.1
36.8
6,415.2
740.7
5,674.5
4.2%
3.8%
5.2%
6.3%
3.7%
3.2%
N/A
4.1%
N/A
6.1%
4.1%
A portion of the debt classified as long-term may be paid down earlier than scheduled at our discretion without
penalty. Certain customary restrictive covenants govern our maximum availability under our credit facilities. We
test and report our compliance with these covenants as required and were in compliance with all of our covenants
at September 30, 2019. The carrying value of our debt includes the fair value step-up of debt acquired in mergers
and acquisitions, and the weighted average interest rate includes the fair value step up. At September 30, 2019,
excluding the step-up, the weighted average interest rate on total debt was 4.2%. At September 30, 2019, the
unamortized fair market value step-up was $228.4 million, which will be amortized over a weighted average
remaining life of 12.1 years. At September 30, 2019, we had $129.8 million of outstanding letters of credit not
drawn upon. At September 30, 2019, we had approximately $2.9 billion of availability under our committed credit
facilities. This liquidity may be used to provide for ongoing working capital needs and for other general corporate
purposes including acquisitions, dividends and stock repurchases. The estimated fair value of our debt was
approximately $10.6 billion and $6.4 billion as of September 30, 2019 and September 30, 2018, respectively. The
fair value of our long-term debt is categorized as level 2 within the fair value hierarchy and is primarily either based
on quoted prices for those or similar instruments, or approximate their carrying amount, as the variable interest
rates reprice frequently at observable current market rates. During fiscal 2019, 2018 and 2017, amortization of
debt issuance costs charged to interest expense were $7.8 million, $6.3 million and $4.5 million, respectively.
107
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Public Bonds / Notes Issued
At September 30, 2019 and September 30, 2018, the face value of our public bond obligations outstanding
were $6.5 billion and $4.9 billion, respectively.
On May 16, 2019, WRKCo issued $500.0 million aggregate principal amount of its 3.90% Senior Notes due
2028 (the “June 2028 Notes”) and $500.0 million aggregate principal amount of its 4.20% Senior Notes due 2032
(the “2032 Notes” and, together with the June 2028 Notes, the “May 2019 Notes”) in a registered offering pursuant
to the Company’s automatic shelf registration statement on Form S-3 under the Securities Act of 1933, as
amended, (the “Securities Act”).The Company, MWV and RKT (RKT and MWV are together referred to as the
“Subsidiary Guarantors”) have guaranteed WRKCo’s obligations under the May 2019 Notes. We may redeem
the May 2019 Notes, in whole or in part, at any time at specified redemption prices, plus accrued and unpaid
interest, if any. The proceeds from the issuance of the May 2019 Notes were used primarily to repay $600.0 million
principal amount of outstanding notes coming due in the next several quarters and reduce outstanding
indebtedness under our 3-year delayed draw term loan.
On December 3, 2018, WRKCo issued $750.0 million aggregate principal amount of its 4.65% Senior Notes
due 2026 (the “2026 Notes”) and $750.0 million aggregate principal amount of its 4.90% Senior Notes due 2029
(the “2029 Notes” and, together with the 2026 Notes, the “December 2018 Notes”) in an unregistered offering.
The Company and the Subsidiary Guarantors have guaranteed WRKCo’s obligations under the December 2018
Notes. We may redeem the 2026 Notes and the 2029 Notes, in whole or in part, at any time at specified
redemption prices, plus accrued and unpaid interest, if any. The proceeds from the issuance of the December
2018 Notes were used primarily to prepay a portion of the amounts outstanding under our Delayed Draw Credit
Facilities (as hereinafter defined).
On March 6, 2018, we issued $600.0 million aggregate principal amount of 3.75% senior notes due 2025 and
$600.0 million aggregate principal amount of 4.0% senior notes due 2028 (collectively, the “March 2018 Notes”) in
an unregistered offering. The Company may redeem the March 2018 Notes, in whole or in part, at any time at
specified redemption prices, plus accrued and unpaid interest, if any. The proceeds from the issuance of the March
2018 Notes were used primarily to pay down the remaining $540.0 million of our then existing term loan facility, pay
down $445.0 million of our commercial paper program, pay down $100.0 million of our Receivables Securitization
Facility and pay down $104.7 million of one of our other credit facilities.
On August 24, 2017, we issued $500.0 million aggregate principal amount of 3.0% Senior Notes due
September 15, 2024 and $500.0 million aggregate principal amount of 3.375% Senior Notes due September 15,
2027 collectively, the “August 2017 Notes” in an unregistered offering. The proceeds from the issuance of the
August 2017 Notes was used to pre-pay $575.0 million of amortization payments through the maturity of our term
loan and $415.0 million then outstanding on the Receivables Securitization Facility.
Exchanged Notes
During fiscal 2019, we conducted offers to exchange WRKCo’s $500.0 million aggregate principal amount of
3.00% Senior Notes due 2024 (the “2024 Notes”), $600.0 million aggregate principal amount of 3.75% Senior
Notes due 2025 (the “2025 Notes”), 2026 Notes, $500.0 million aggregate principal amount of 3.375% Senior
Notes due 2027 (the “2027 Notes”), $600.0 million aggregate principal amount of 4.00% Senior Notes due 2028
(the “2028 Notes”) and 2029 Notes for new notes of the applicable series with terms substantially identical with the
notes of such series that are registered under the Securities Act. As a result of the exchange offer, $490.0 million in
aggregate principal amount of the 2024 Notes, $600.0 million in aggregate principal amount of the 2025 Notes,
$749.3 million in aggregate principal amount of the 2026 Notes, $491.0 million in aggregate principal amount of the
2027 Notes, $590.0 million in aggregate principal amount of the 2028 Notes and $750.0 million in aggregate
principal amount of the 2029 Notes were validly tendered and subsequently exchanged.
Term Loan and Revolving Credit Facility
On June 7, 2019, we entered into a $300.0 million credit agreement providing for a 5-year unsecured term loan
with Bank of America, N.A., as administrative agent. The facility is scheduled to mature on June 7, 2024. The
proceeds from the facility were used to prepay a portion of the amounts outstanding under our 3-year term loan
and repay amounts outstanding under our commercial paper program. The applicable interest rate margin was
108
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
initially 0.825% to 1.750% per annum for LIBOR rate loans and 0.000% to 0.750% per annum for alternate base
rate loans, in each case depending on the Leverage Ratio (as defined in the credit agreement) or our corporate
credit ratings, whichever yields a lower applicable interest rate margin, at such time. At September 30, 2019, there
was $300.0 million outstanding.
In connection with the Combination, on July 1, 2015, we entered into a credit agreement (the “Credit
Agreement”), which provided for a 5-year senior unsecured term loan in an aggregate principal amount of $2.3
billion and a 5-year senior unsecured revolving credit facility in an aggregate committed principal amount of $2.0
billion (together the “Credit Facility”). On July 1, 2015, we drew $1.2 billion on the term loan and on March 24,
2016, we drew another $600.0 million and the balance of the delayed draw term loan facility was terminated. The
Credit Facility is unsecured and is guaranteed by the Company and the Subsidiary Guarantors. On June 22, 2016,
we pre-paid $200.0 million of the term loan amortization payments due through the second quarter of fiscal 2018.
On August 24, 2017, in connection with the issuance of public bonds, we pre-paid $575.0 million of the term loan
amortization payments due through the maturity of the term loan. On October 31, 2017, we pre-paid $485.0 million
of the outstanding principal balance by borrowing on our Receivables Securitization Facility. On March 14, 2018, in
connection with the issuance of public bonds, we pre-paid the remaining $540.0 million principal balance.
In fiscal 2016 and 2017, we executed options to extend the term of the 5-year senior unsecured revolving
credit facility initially for one year beyond the original term and subsequently, for a second additional year.
Approximately $1.9 billion of the original $2.0 billion aggregate committed principal amount has been extended to
July 1, 2022, and the remainder will continue to mature on July 1, 2020. Up to $150 million under the revolving
credit facility may be used for the issuance of letters of credit. In addition, up to $400 million of the revolving credit
facility may be used to fund borrowings in non-U.S. dollar currencies including Canadian dollars, Euro and British
Pound. Additionally, we may request up to $200 million of the revolving credit facility to be allocated to a Mexican
peso revolving credit facility. At September 30, 2019 and September 30, 2018, we had no amounts outstanding
under the revolving credit facility.
At our option, loans issued under the Credit Facility will bear interest at either LIBOR or an alternate base rate,
in each case plus an applicable interest rate margin. Loans will initially bear interest at LIBOR plus 1.125% per
annum, in the case of LIBOR borrowings, or at the alternate base rate plus 0.125% per annum, in the alternative,
and thereafter the interest rate will fluctuate between LIBOR plus 1.00% per annum and LIBOR plus 1.50% per
annum (or between the alternate base rate plus 0.00% per annum and the alternate base rate plus 0.50% per
annum), based upon our corporate credit ratings or the leverage ratio (as defined in the Credit Agreement)
(whichever yields a lower applicable interest rate margin) at such time. In addition, we will be required to pay fees
that will fluctuate between 0.125% per annum to 0.25% per annum on the unused amount of the revolving credit
facility, based upon our corporate credit ratings or the leverage ratio (whichever yields a lower fee) at such
time. Loans under the Credit Facility may be prepaid at any time without premium.
Farm Loan Credit Facilities
On July 1, 2015, three WestRock wholly-owned subsidiaries, WestRock CP, LLC, a Delaware limited liability
company, WestRock Converting, LLC, a Georgia limited liability company, and WestRock Virginia, LLC, a
Delaware limited liability company, as borrowers, entered into a credit agreement (the “Prior Farm Loan Credit
Agreement”) with CoBank ACB, as administrative agent. The Prior Farm Loan Credit Agreement provided for a 7-
year senior unsecured term loan in an aggregate principal amount of $600.0 million (the “Prior Farm Loan Credit
Facility”). The Prior Farm Credit Facility was guaranteed by the Company and the Subsidiary Guarantors. The
carrying value of this facility at September 30, 2018 was $599.4 million. On September 27, 2019, we repaid the
entire balance of the Prior Farm Loan Credit Facility and entered into a new agreement.
On September 27, 2019, one of our wholly-owned subsidiaries, WestRock Southeast LLC, entered into a
credit agreement (the “Farm Loan Credit Agreement”) with CoBank ACB, as administrative agent. The Farm
Loan Credit Agreement provides for a 7-year senior unsecured term loan in an aggregate principal amount of
$600.0 million (the “Farm Loan Credit Facility”). At any time, we may increase the principal amount by up to
$300.0 million by written notice. The Farm Credit Facility is guaranteed by the Company, WRKCo and the
Subsidiary Guarantors. The carrying value of this facility at September 30, 2019 was $598.6 million.
109
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
European Revolving Credit Facility
On April 27, 2018, we entered into a €500.0 million revolving credit facility with an incremental €100.0 million
accordion feature with Coöperatieve Rabobank U.A., New York Branch as the administrative agent for the
syndicate of banks (the “European Revolving Credit Facility”). This facility provides for a 3-year unsecured U.S.
dollar, Euro and British Pound denominated borrowing of not more than €500.0 million and matures on April 27,
2021. At September 30, 2019, we had borrowed $350.0 million under this facility and entered into foreign currency
exchange contracts of $351.0 million as an economic hedge for the U.S. dollar denominated borrowing plus
interest by a non-U.S. dollar functional currency entity. The net of gains or losses from these foreign currency
exchange contracts and the changes in the remeasurement of the U.S. dollar denominated borrowing in our
foreign subsidiaries have been immaterial to our consolidated statements of income. As of September 30, 2019,
$175.0 million of the total amount outstanding was classified as short-term debt. At September 30, 2018, we had
borrowed $355.0 million under this facility.
Other Revolving Credit Facilities
On October 31, 2017, we entered into a credit agreement with Wells Fargo Bank, National Association, as
administrative agent, providing for a 364-day senior unsecured revolving credit facility in an aggregate committed
principal amount of $450.0 million. The proceeds of the credit facility may be used for working capital and for other
general corporate purposes. The credit facility is unsecured and is guaranteed by RKT and MWV and WestRock,
Inc. At our option, loans issued under the credit facility will bear interest at either LIBOR or an alternate base rate,
in each case plus an applicable interest rate margin. On October 29, 2018, we renewed the term of the credit
facility for another 364 days, and subsequently, on October 25, 2019, we renewed the term of the credit facility for
another 364 days. The facility now matures on October 23, 2020, or earlier, as specified in the agreement. At
September 30, 2019 and 2018, there were no amounts outstanding. At September 30, 2019, the average
borrowing rate under the facility would have been 3.17%.
Receivables Securitization Facility
On May 2, 2019, we amended our $700.0 million receivables securitization agreement (the “Receivables
Securitization Facility”) to, among other things, extend its maturity date from July 22, 2019 to May 2, 2022.
Borrowing availability under this facility is based on the eligible underlying accounts receivable and compliance
with certain covenants. The agreement governing the Receivables Securitization Facility contains restrictions,
including, among others, on the creation of certain liens on the underlying collateral. We test and report our
compliance with these covenants monthly; we were in compliance with all of these covenants at September 30,
2019. The Receivables Securitization Facility includes certain restrictions on what constitutes eligible receivables
under the facility and allows for the exclusion of eligible receivables of specific obligors each calendar year subject
to the following restrictions: (i) the aggregate of excluded receivables may not exceed 7.5% of eligible receivables
under the Receivables Securitization Facility and (ii) the excluded receivables of each obligor may not exceed
2.5% of the aggregate outstanding balance. At September 30, 2019 and September 30, 2018 there were no
amounts outstanding under this facility. At September 30, 2019 and September 30, 2018, maximum available
borrowings, excluding amounts outstanding under the Receivables Securitization Facility, were $592.1 million and
$571.0 million, respectively. The carrying amount of accounts receivable collateralizing the maximum available
borrowings at September 30, 2019 and September 30, 2018 were approximately $959.3 million and $887.0 million,
respectively. We have continuing involvement with the underlying receivables as we provide credit and collections
services pursuant to the Receivables Securitization Facility agreement. The borrowing rate consists of a blend of
the market rate for asset-backed commercial paper and the one month LIBOR rate plus a credit spread of 0.80%.
The commitment fee was 0.25% and 0.25% as of September 30, 2019 and September 30, 2018, respectively.
Commercial Paper Program
On October 31, 2017, we established an unsecured commercial paper program, pursuant to which we were
able to issue short-term, unsecured commercial paper notes in an aggregate principal amount at any time not to
exceed $1.0 billion with up to 397-day maturities. On December 7, 2018, we terminated the commercial paper
program and established a new unsecured commercial paper program with WRKCo as the issuer. Under the new
program, we may issue short-term unsecured commercial paper notes in an aggregate principal amount at any
time not to exceed $1.0 billion with up to 397-day maturities. The program has no expiration date and can be
110
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
terminated by either the agent or us with not less than 30 days’ notice. Our $2.0 billion unsecured revolving credit
facility is intended to backstop the commercial paper program. Amounts available under the program may be
borrowed, repaid and re-borrowed from time to time. The net proceeds from issuances of notes under the program
were used to repay amounts outstanding under the KapStone securitization facility that was assumed in the
KapStone Acquisition and subsequently terminated, and have been, and are expected to continue to be, used for
general corporate purposes. At September 30, 2019, there was $339.2 million outstanding and the average
borrowing rate was 2.39%. As of September 30, 2019, $250.0 million of the total amount outstanding was
classified as long-term debt.
Delayed Draw Credit Facilities
On March 7, 2018, we entered into a credit agreement (the “Delayed Draw Credit Agreement”) with Wells
Fargo as administrative agent to provide for $3.8 billion of senior unsecured term loans, consisting of a 364-day
$300.0 million term loan, a 3-year $1.75 billion term loan and a 5-year $1.75 billion term loan (collectively, the
“Delayed Draw Credit Facilities”). On November 2, 2018, in connection with the closing of the KapStone
Acquisition, we drew upon the facility in full. The proceeds of the Delayed Draw Credit Facilities and other sources
of cash were used to pay the consideration for the KapStone Acquisition, to repay certain existing indebtedness of
KapStone and to pay fees and expenses incurred in connection with the KapStone Acquisition. The Delayed Draw
Credit Facilities are senior unsecured obligations of WRKCo, as borrower, and each of the Company and the
Subsidiary Guarantors, respectively, as guarantors. Loans under the Delayed Draw Credit Facilities may be
prepaid at any time without premium.
On December 3, 2018, in connection with the issuance of the December 2018 Notes, we repaid the $300.0
million 364-day term loan under the Delayed Draw Credit Facilities, and prepaid $926.5 million of the 3-year term
loan and $262.5 million of the 5-year term loan. In the third quarter of fiscal 2019, we prepaid $700.0 million of the
3-year term loan primarily using proceeds from the issuance of the May 2019 Notes. In the fourth quarter of fiscal
2019, we prepaid all amounts due on the 3-year term loan and $87.5 million of the 5-year term loan using proceeds
from the issuance of commercial paper. At September 30, 2019, there was $1,396.9 million outstanding on the 5-
year term loan.
At our option, loans issued under the Delayed Draw Credit Facilities will bear interest at a floating rate based
on either LIBOR or an alternate base rate, in each case plus an applicable interest rate margin. The applicable
interest rate margin was initially 1.125% to 2.000% per annum for LIBOR rate loans and 0.125% to 1.000% per
annum for alternate base rate loans, in each case depending on the Leverage Ratio (as defined in the credit
agreement) or our corporate credit ratings, whichever yields a lower applicable interest rate margin, at such time.
On February 26, 2019, we amended the Delayed Draw Credit Agreement. The applicable interest rate margin for
the 3-year term loan is now 1.000% to 1.875% for LIBOR rate loans and 0.000% to 0.875% for alternate base rate
loans. The applicable interest rate margin for the 5-year term loan is now 1.000% to 1.950% for LIBOR rate loans
and 0.000% to 0.950% for alternate base rate loans.
Brazil Delayed Draw Credit Facilities
On April 10, 2019, we entered into a credit agreement to provide for R$750.0 million of senior unsecured term
loans with an incremental R$250.0 million accordion feature (the “Brazil Delayed Draw Credit Facilities”). The
principal can be drawn at any time over the initial 18 months in up to 10 drawdowns of at least BRL 50.0 million
each and will be repaid in equal, semiannual installments beginning on April 10, 2021 until the facility matures on
April 10, 2024. The proceeds of the Brazil Delayed Draw Credit Facilities are to be used to support the production
of goods or acquisition of inputs that are essential or ancillary to export activities. The Brazil Delayed Draw Credit
Facilities are senior unsecured obligations of Rigesa Celulose, Papel E Embalagens Ltda. (a subsidiary of the
Company), as borrower, and the Company, as guarantor. Loans issued under the Brazil Delayed Draw Credit
Facilities will bear interest at a floating rate based on Brazil’s Certificate of Interbank Deposit rate plus a spread of
1.50%. In addition, we will be required to pay fees of 0.45% on the unused amount of the facility. At September 30,
2019, there was R$199.5 million outstanding.
111
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Capital Lease and Other Indebtedness
The range of due dates on our capital lease obligations are primarily in fiscal 2027 to 2035. Our international
debt is primarily in Europe, Brazil and India.
As of September 30, 2019, the aggregate maturities of debt, excluding capital lease obligations, for the
succeeding five fiscal years and thereafter are as follows (in millions):
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Thereafter
Fair value of debt step-up, deferred financing costs and unamortized
bond discounts
Total
$
$
550.8
184.8
755.0
542.6
1,951.7
5,729.2
163.5
9,877.6
As of September 30, 2019, the aggregate maturities of capital lease obligations for the succeeding five fiscal
years and thereafter are as follows (in millions):
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Thereafter
Fair value step-up
Total
$
$
6.4
4.8
3.9
2.0
0.9
150.9
16.9
185.8
Note 14. Selected Condensed Consolidating Financial Statements of Parent, Issuer, Guarantors and
Non-Guarantors
The 2024 Notes, the 2025 Notes, the 2026 Notes, the 2027 Notes, the 2028 Notes, the June 2028 Notes, the
2029 Notes and the 2032 Notes (the “Notes”) were issued by WRKCo (the “Issuer”). Upon issuance, the 2024
Notes, the 2025 Notes, the 2027 Notes and the 2028 Notes were fully and unconditionally guaranteed by the
Subsidiary Guarantors. On November 2, 2018, in connection with the consummation of the KapStone Acquisition,
Whiskey Holdco, Inc. became the direct parent of the Issuer, changed its name to WestRock Company (“Parent”)
and fully and unconditionally guaranteed the 2024 Notes, the 2025 Notes, the 2027 Notes and the 2028 Notes.
The 2026 Notes, the June 2028 Notes, the 2029 Notes and the 2032 Notes were issued by the Issuer subsequent
to the consummation of the KapStone Acquisition and were fully and unconditionally guaranteed at the time of
issuance by Parent and the Subsidiary Guarantors. Accordingly, each series of the Notes is fully and
unconditionally guaranteed on a joint and several basis by Parent and the Subsidiary Guarantors.
In accordance with GAAP, we retrospectively account for changes in our legal structure that constitute
transfers of businesses between issuers, guarantors and non-guarantors. As such, our prior period financials may
vary from those previously reported. The information in the tables reflect such revisions, as well as revisions to
correct immaterial errors in the prior presentation of our financial statements.
In accordance with Rule 3-10 of Regulation S-X, the following tables present condensed consolidating financial
data of the Parent, the Issuer, the Subsidiary Guarantors, the non-guarantor subsidiaries and eliminations. Such
financial data include Condensed Consolidating Balance Sheet data as of September 30, 2019 and 2018 and the
related Condensed Consolidating Statement of Income and Cash Flow data for each of the three years in the
period ended September 30, 2019.
112
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(In millions)
Parent
Issuer
Year Ended September 30, 2019
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
Net sales
Cost of goods sold
Selling, general and administrative,
excluding intangible amortization
Selling, general and administrative
$
intangible amortization
Loss (gain) on disposal of assets
Multiemployer pension withdrawal
income
Land and Development impairments
Restructuring and other costs
Operating profit (loss)
Interest expense, net
Intercompany interest (expense)
income, net
Loss on extinguishment of debt
Pension and other postretirement
non-service (expense) income
Other (expense) income, net
Equity in income of unconsolidated
entities
Equity in income of consolidated
entities
Income before income taxes
Income tax benefit (expense)
Consolidated net income
Less: Net income attributable to
noncontrolling interests
Net income attributable to common
stockholders
Comprehensive income attributable
$
— $
—
— $ 2,543.8 $
—
2,026.0
18,364.4 $ (2,619.2) $ 18,289.0
14,540.0
(2,600.2)
15,114.2
—
—
—
—
—
—
—
—
—
—
—
—
—
(0.9)
120.0
1,596.1
—
1,715.2
—
—
104.4
0.1
295.8
(41.3)
—
—
400.2
(41.2)
(0.2)
—
7.6
(6.5)
(246.8)
(3.2)
(3.0)
—
(5.1)
(0.3)
—
0.3
293.3
(163.4)
(115.3)
(1.9)
(6.5)
3.4
(5.8)
13.0
165.8
1,226.6
(21.1)
99.5
(0.2)
80.7
4.1
—
—
10.1
—
—
—
(19.0)
—
19.0
—
—
—
—
(6.3)
13.0
173.7
1,494.4
(431.3)
—
(5.1)
74.2
2.4
10.1
862.9 1,149.9
885.3
862.9
—
67.9
953.2
862.9
729.2
738.8
7.2
746.0
—
1,399.7
(351.9)
1,047.8
(2,742.0)
(2,742.0)
—
(2,742.0)
—
1,144.7
(276.8)
867.9
—
—
—
(5.0)
—
(5.0)
862.9 $
953.2 $
746.0 $
1,042.8 $ (2,742.0) $
862.9
to common stockholders
$
489.0 $
577.7 $
377.3 $
682.4 $ (1,637.4) $
489.0
113
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Year Ended September 30, 2018
(In millions)
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
$
Net sales
Cost of goods sold
Selling, general and administrative,
excluding intangible amortization
Selling, general and administrative
intangible amortization
Loss on disposal of assets
Multiemployer pension withdrawals
Land and Development impairments
Restructuring and other costs
Operating profit (loss)
Interest expense, net
Intercompany interest income
(expense), net
(Loss) gain on extinguishment of
debt
Pension and other postretirement
non-service (expense) income
Other income (expense), net
Equity in income of unconsolidated
entities
Equity in income of consolidated
entities
Income (loss) before income taxes
Income tax benefit
Consolidated net income (loss)
Less: Net income attributable to
noncontrolling interests
Net income (loss) attributable to
common stockholders
Comprehensive income (loss)
attributable to common
stockholders
$
$
— $
—
— $ 2,593.0 $
—
2,004.2
16,345.4 $ (2,653.3) $ 16,285.1
12,923.1
(2,653.3)
13,572.2
—
1.5
94.1
1,451.0
—
1,546.6
—
—
—
—
—
—
(12.5)
—
—
6.5
—
8.7
(16.7)
(76.9)
104.2
0.2
12.5
—
5.6
372.2
(173.5)
192.4
9.9
165.2
31.9
91.1
831.7
(30.9)
—
28.1
(87.6)
59.5
(0.2)
(1.4)
1.9
(0.4)
—
—
—
—
0.7
(6.9)
(22.5)
102.2
34.5
—
7.5
26.0
—
—
—
—
—
—
—
—
—
—
—
—
296.6
10.1
184.2
31.9
105.4
1,187.2
(293.8)
—
(0.1)
95.3
12.7
33.5
— 1,962.0
(12.7) 1,895.8
3.1
19.9
(9.6) 1,915.7
1,343.8
1,434.9
131.8
1,566.7
—
1,022.6
719.7
1,742.3
(3,305.8)
(3,305.8)
—
(3,305.8)
—
1,034.8
874.5
1,909.3
—
—
—
(3.2)
—
(3.2)
(9.6) $ 1,915.7 $ 1,566.7 $
1,739.1 $ (3,305.8) $
1,906.1
(9.6) $ 1,677.7 $ 1,351.4 $
1,498.6 $ (2,850.0) $
1,668.1
114
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(In millions)
Parent
Issuer
Year Ended September 30, 2017
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
$
Net sales
Cost of goods sold
Selling, general and administrative,
excluding intangible amortization
Selling, general and administrative
intangible amortization
Loss on disposal of assets
Land and Development impairments
Restructuring and other costs
Operating profit (loss)
Interest expense, net
Intercompany interest income
(expense), net
(Loss) gain on extinguishment of debt
Pension and other postretirement
non-service income
Other (expense) income, net
Equity in income of unconsolidated
entities
Equity in income of consolidated
entities
Gain on sale of HH&B
Income before income taxes
Income tax benefit (expense)
Consolidated net income
Net loss attributable to noncontrolling
interests
Net income attributable to common
stockholders
Comprehensive income attributable
to common stockholders
$
$
— $
—
— $ 2,485.6 $
—
2,289.0
15,208.5 $ (2,834.4) $ 14,859.7
12,141.5
(2,834.4)
12,686.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0.8
123.9
1,332.5
—
1,457.2
—
—
—
1.3
(2.1)
(40.1)
18.5
(0.9)
—
(1.0)
104.2
—
—
26.0
(57.5)
(172.5)
(53.1)
3.1
—
(30.2)
125.4
4.8
46.7
169.4
842.8
(9.9)
34.6
(0.4)
51.8
42.7
—
12.7
26.3
—
—
—
—
—
—
—
—
—
—
—
724.2
—
698.6
9.6
708.2
643.7
—
346.2
120.5
466.7
—
192.8
1,180.7
(289.1)
891.6
(1,367.9)
—
(1,367.9)
—
(1,367.9)
229.6
4.8
46.7
196.7
783.2
(222.5)
—
1.8
51.8
11.5
39.0
—
192.8
857.6
(159.0)
698.6
—
—
9.6
—
9.6
— $
708.2 $
466.7 $
901.2 $ (1,367.9) $
708.2
— $
877.3 $
609.0 $
1,071.8 $ (1,680.8) $
877.3
115
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2019
(In millions)
ASSETS
Current Assets:
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
$
Cash and cash equivalents
Accounts receivable
Inventories
Other current assets
Intercompany receivables
Assets held for sale
— $
—
—
—
—
—
—
—
—
—
— $
—
—
1.2
238.2
—
239.4
—
—
—
17.8 $
31.1
254.3
11.8
—
—
315.0
18.9
1,158.6
1,485.0
Total current assets
Property, plant and equipment, net
Goodwill
Intangibles, net
Restricted assets held by special
purpose
—
entities
Prepaid pension asset
—
Intercompany notes receivable
156.9
Investments in consolidated subsidiaries 11,973.7 18,460.4 20,039.9
Other assets
185.3
$11,973.7 $18,922.6 $ 23,359.6 $
Total Assets
—
—
155.0
—
—
—
67.8
—
133.8 $
2,201.7
1,853.2
483.2
1,340.5
25.8
6,038.2
11,170.6
6,127.0
2,574.5
— $
(39.6)
—
—
(1,578.7)
—
(1,618.3)
151.6
2,193.2
2,107.5
496.2
—
25.8
4,974.3
— 11,189.5
—
7,285.6
—
4,059.5
1,274.3
224.7
3,026.8
—
—
(3,338.7)
— (50,474.0)
(76.1)
1,274.3
224.7
—
—
1,148.8
31,407.9 $(55,507.1) $ 30,156.7
971.8
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt
Accounts payable
Accrued compensation and benefits
Other current liabilities
Intercompany payables
$
Total current liabilities
Long-term debt due after one year
Intercompany notes payable
Pension liabilities, net of current portion
Postretirement benefit liabilities, net of
current portion
Non-recourse liabilities held by special
purpose entities
Deferred income taxes
Other long-term liabilities
Redeemable noncontrolling interests
Total stockholders’ equity
Noncontrolling interests
Total equity
Total Liabilities and Equity
— $
—
0.2
—
303.6
303.8
135.3 $
0.7
—
18.6
10.5
165.1
— 6,608.0
—
636.3
—
—
108.9 $
31.3
14.6
83.8
1,052.9
1,291.5
1,982.9
2,390.5
147.6
316.9 $
1,839.4
455.6
469.4
211.7
3,293.0
911.4
311.9
146.4
— $
(39.6)
—
—
(1,578.7)
(1,618.3)
—
(3,338.7)
—
561.1
1,831.8
470.4
571.8
—
3,435.1
9,502.3
—
294.0
—
—
25.7
136.4
—
162.1
—
—
—
—
—
—
12.9
—
—
278.9
131.2
—
11,669.9 11,500.3 17,111.3
—
11,669.9 11,500.3 17,111.3
$11,973.7 $18,922.6 $ 23,359.6 $
—
—
—
(76.1)
—
—
1,145.2
2,675.2
909.8
1.9
1,145.2
2,878.0
1,053.9
1.9
21,862.4 (50,474.0) 11,669.9
14.3
21,876.7 (50,474.0) 11,684.2
31,407.9 $(55,507.1) $ 30,156.7
14.3
—
116
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In millions)
ASSETS
Current Assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Other current assets
Intercompany receivables
Assets held for sale
Total current assets
Property, plant and equipment,
net
Goodwill
Intangibles, net
Restricted assets held by
special purpose entities
Prepaid pension asset
Intercompany notes receivable
Investments in consolidated
subsidiaries
Other assets
Total Assets
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt
Accounts payable
Accrued compensation and
benefits
Other current liabilities
Intercompany payables
Total current liabilities
Long-term debt due after one
year
Intercompany notes payable
Pension liabilities, net of
current portion
Postretirement benefit liabilities,
net of current portion
Non-recourse liabilities held by
special purpose entities
Deferred income taxes
Other long-term liabilities
Redeemable noncontrolling
interests
Total stockholders’ equity
Noncontrolling interests
Total equity
Total Liabilities and Equity
CONDENSED CONSOLIDATING BALANCE SHEETS
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
September 30, 2018
$
$
$
— $
—
—
—
—
—
—
—
—
—
—
—
—
0.2 $
0.1
—
0.4
27.7
—
28.4
490.8 $
196.5
233.4
17.2
269.8
—
1,207.7
—
—
—
—
—
884.2
21.3
1,151.3
1,589.4
—
—
33.1
13,260.3
12.4
—
3.4
3.4 $ 14,185.3 $ 19,241.9 $
15,066.3
172.8
145.8 $
— $
1,840.2
1,596.2
230.9
792.8
59.5
4,665.4
9,061.2
4,426.3
1,532.6
1,281.0
420.0
2,865.4
(26.1)
—
—
(1,090.3)
—
(1,116.4)
—
—
—
—
—
(3,782.7)
636.8
2,010.7
1,829.6
248.5
—
59.5
4,785.1
9,082.5
5,577.6
3,122.0
1,281.0
420.0
—
—
910.8
(28,326.6)
(7.1)
25,162.7 $ (33,232.8) $
—
1,092.3
25,360.5
— $
—
— $
0.8
609.5 $
40.3
131.2 $
1,701.8
— $
(26.1)
740.7
1,716.8
—
—
13.0
13.0
—
—
—
—
—
—
—
0.2
3.2
506.6
510.8
2,179.4
—
—
—
—
—
16.1
10.7
77.7
570.4
1,308.6
2,460.1
2,865.4
135.9
28.1
—
291.0
106.2
388.4
395.6
0.3
2,617.3
1,035.0
917.3
125.4
106.7
1,153.7
2,037.6
872.5
—
—
(1,090.3)
(1,116.4)
—
(3,782.7)
—
—
—
(7.1)
—
—
(9.6)
—
—
11,479.0
—
—
12,046.6
—
$
12,046.6
(9.6) 11,479.0
3.4 $ 14,185.3 $ 19,241.9 $
—
(28,326.6)
—
4.2
16,280.0
13.0
(28,326.6)
16,293.0
25,162.7 $ (33,232.8) $
399.3
476.5
—
3,333.3
5,674.5
—
261.3
134.8
1,153.7
2,321.5
994.8
4.2
11,469.4
13.0
11,482.4
25,360.5
117
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(In millions)
Parent
Issuer
Year Ended September 30, 2019
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
Operating activities:
Net cash provided by (used for)
operating activities
Investing activities:
Capital expenditures
Cash paid related to business
combinations, net of cash
acquired
Investment in unconsolidated
entities
Proceeds from sale of property,
plant and equipment
Proceeds from property, plant and
equipment insurance settlement
Intercompany notes issued
Intercompany notes proceeds
Intercompany capital investment
Other
Net cash (used for) provided by
$
538.2 $
(203.8) $
442.1 $
1,533.7 $
— $
2,310.2
—
—
—
(1,369.1)
—
(1,369.1)
—
—
—
—
—
—
—
—
—
(563.0)
—
—
—
9.3
(563.0)
—
—
—
—
—
(0.1)
6.7
—
30.2
(3,374.2)
—
(3,374.2)
(11.2)
119.1
25.5
(75.7)
3,870.1
—
0.1
—
—
—
75.8
(3,886.1)
1,126.0
—
(11.2)
119.1
25.5
—
—
—
30.3
investing activities
(563.0)
(553.7)
36.8
(815.4)
(2,684.3)
(4,579.6)
Financing activities:
Proceeds from issuance of notes
Additions (repayments) to revolving
credit facilities
Additions to debt
Repayments of debt
Changes in commercial paper, net
Other financing additions
Issuances of common stock, net of
related minimum tax withholdings
Purchases of common stock
Cash dividends paid to
stockholders
Cash distributions paid to
noncontrolling interests
Intercompany notes borrowing
Intercompany notes payments
Intercompany capital receipt
Other
Net cash provided by (used for)
financing activities
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
Decrease in cash, cash equivalents
and restricted cash
Cash, cash equivalents and restricted
cash at beginning of period
Cash, cash equivalents and restricted
cash at end of period
$
—
2,498.2
—
—
—
2,498.2
—
—
—
—
—
46.0
4,101.8
(2,400.0)
339.2
—
18.3
(88.6)
(467.9)
—
—
—
—
—
—
563.0
—
—
—
(3,800.0)
—
(27.9)
—
—
(957.5)
—
—
—
—
—
—
75.7
(70.1)
—
—
(8.8)
959.8
(2,274.1)
—
10.0
—
—
—
—
—
—
—
—
—
—
—
(4.3)
0.1
(16.0)
563.0
36.0
—
(75.8)
3,886.1
(1,126.0)
—
37.2
5,061.6
(5,631.6)
339.2
10.0
18.3
(88.6)
(467.9)
(4.3)
—
—
—
8.1
24.8
757.3
(951.9)
(734.3)
2,684.3
1,780.2
—
—
—
—
—
4.0
(0.2)
(473.0)
(12.0)
0.2
490.8
145.8
—
—
—
4.0
(485.2)
636.8
— $
— $
17.8 $
133.8 $
— $
151.6
118
The condensed consolidating statements of cash flows for the year ended September 30, 2019 do not include
non-cash transactions between Parent, Issuer, Guarantor Subsidiaries and Non-Guarantor Subsidiaries. From
time to time, we may enter into non-cash transactions for simplicity of execution of intercompany transactions.
These may
intercompany non-cash returns of capital,
intercompany debt-to-equity conversions or other transactions of a similar nature. The table below summarizes
these non-cash transactions.
intercompany non-cash capitalizations,
include
Year Ended September 30, 2019
(In millions)
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
Operating activities:
Intercompany receivables
Intercompany payables
Investing activities:
$
$
(140.9) $
— $
— $
— $
— $
— $
— $
140.9 $
140.9 $
(140.9) $
Intercompany notes issued
Intercompany notes proceeds
Intercompany capital investment
Intercompany return of capital
— $ (3,800.0) $
$
— $
$
4,519.8 $
$ (10,396.2) $ (5,895.5) $
1,479.6 $
$
606.7 $
(4,667.2) $
4,536.8 $
(6,889.3) $
1,032.7 $
(10,777.8) $ 19,245.0 $
6,822.0 $ (15,878.6) $
— $ 23,181.0 $
— $
(3,119.0) $
Financing activities:
Intercompany notes borrowing
$
Intercompany notes payments
$
Intercompany capital receipt
$
Intercompany capital distribution $
Intercompany dividends paid
$
— $
4,436.3 $
— $
— $
— $ 10,396.2 $
(606.7) $
— $
(563.0) $
— $
2,541.5 $
(3,022.0) $
5,413.7 $
(457.5) $
(302.2) $
12,267.2 $ (19,245.0) $
(12,856.6) $ 15,878.6 $
7,371.1 $ (23,181.0) $
3,119.0 $
(1,491.8) $
1,737.2 $
(1,435.0) $
—
—
—
—
—
—
—
—
—
—
—
119
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(In millions)
Parent
Issuer
Year Ended September 30, 2018
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
Operating activities:
Net cash provided by operating
activities
Investing activities:
$
4.1 $
563.4 $
375.8 $
1,016.3 $
(28.4) $
1,931.2
Capital expenditures
Cash paid for purchase of
businesses, net of cash
acquired
Cash receipts on sold trade
receivables
Investment in unconsolidated entities
Proceeds from sale of property, plant
and equipment
Proceeds from property, plant and
equipment insurance settlement
Intercompany notes issued
Intercompany notes proceeds
Intercompany capital investment
Intercompany return of capital
Other
Net cash (used for) provided by
investing activities
Financing activities:
Proceeds from issuance of notes
Repayments to revolving credit
facilities
Additions to debt
Repayments of debt
Other financing repayments
Issuances of common stock, net of
related minimum tax withholdings
Purchases of common stock
Cash dividends paid to stockholders
Cash distributions paid to
noncontrolling interests
Intercompany notes borrowing
Intercompany notes payments
Intercompany capital receipt
Intercompany capital distribution
Intercompany dividends
Other
Net cash used for financing
activities
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
Increase (decrease) in cash, cash
equivalents and restricted cash
Cash, cash equivalents and restricted
cash at beginning of period
Cash, cash equivalents and restricted
cash at end of period
—
—
(1.2)
(998.7)
—
(999.9)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2.0)
—
—
—
—
—
—
—
(1.4)
4.5
—
82.6
18.6
(239.9)
461.6
(114.3)
23.3
7.9
—
—
—
—
27.6
—
—
—
—
—
1.4
(4.5)
2.0
(82.6)
—
(239.9)
461.6
(114.3)
23.3
7.9
—
—
—
—
46.2
(2.0)
103.1
(832.5)
(83.7)
(815.1)
—
1,197.3
—
—
—
1,197.3
—
—
(0.1)
—
(106.7)
2.7
(1,025.2)
—
—
—
—
26.6
(195.1)
(440.9)
—
—
—
—
—
—
(4.0)
—
—
—
—
—
—
(19.9)
—
—
(22.5)
(8.9)
—
—
—
—
—
—
—
—
—
—
(8.8)
852.5
(985.1)
(15.3)
—
—
—
(33.3)
1.4
(4.5)
2.0
(82.6)
(28.4)
31.6
—
—
—
—
—
—
—
—
(1.4)
4.5
(2.0)
82.6
28.4
—
(115.5)
855.2
(2,032.9)
(24.2)
26.6
(195.1)
(440.9)
(33.3)
—
—
—
—
—
7.7
(4.1)
(561.2)
(31.4)
(270.5)
112.1
(755.1)
—
—
—
—
—
(28.2)
0.2
447.5
(114.9)
—
43.3
260.7
—
—
—
(28.2)
332.8
304.0
$
— $
0.2 $
490.8 $
145.8 $
— $
636.8
120
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The condensed consolidating statements of cash flows for the year ended September 30, 2018 do not include
non-cash transactions between Parent, Issuer, Guarantor Subsidiaries and Non-Guarantor Subsidiaries. From
time to time, we may enter into non-cash transactions for simplicity of execution of intercompany transactions.
These may
intercompany non-cash returns of capital,
intercompany debt-to-equity conversions or other transactions of a similar nature. The table below summarizes
these non-cash transactions.
intercompany non-cash capitalizations,
include
Year Ended September 30, 2018
(In millions)
Parent
Issuer
Investing activities:
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
Intercompany notes issued
Intercompany notes proceeds
Intercompany capital investment
Intercompany return of capital
$
$
$
$
— $
— $
— $
— $
— $
— $
(755.3) $
1,356.3 $
— $
— $
(335.3) $
766.0 $
(392.1) $
83.0 $
— $
— $
392.1 $
(83.0) $
1,090.6 $
(2,122.3) $
Financing activities:
Intercompany notes borrowing
$
Intercompany notes payments
$
Intercompany capital receipt
$
Intercompany capital distribution $
Intercompany dividends paid
$
— $
— $
— $
— $
— $
— $
(69.0) $
— $
— $
— $
392.1 $
(14.0) $
736.9 $
(1,356.3) $
— $
— $
— $
353.7 $
(766.0) $
(285.9) $
(392.1) $
83.0 $
(1,090.6) $
2,122.3 $
285.9 $
—
—
—
—
—
—
—
—
—
121
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(In millions)
Parent
Issuer
Year Ended September 30, 2017
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
Operating activities:
Net cash provided by operating activities
$
— $
928.6 $
344.2 $
192.4 $
(1.4) $
1,463.8
Investing activities:
Capital expenditures
Cash paid for purchase of businesses, net of
cash acquired
Cash receipts on sold trade receivables
Investment in unconsolidated entities
Proceeds from sale of HH&B
Proceeds from sale of property, plant and
equipment
Proceeds from property, plant and
equipment insurance settlement
Intercompany notes issued
Intercompany notes proceeds
Intercompany capital investment
Intercompany return of capital
Other
Net cash used for investing activities
Financing activities:
Proceeds from issuance of notes
Additions to revolving credit
facilities
Additions to debt
Repayments of debt
Other financing (repayments) additions
Issuances of common stock, net of related
minimum tax withholdings
Purchases of common stock
Cash dividends paid to stockholders
Cash distributions paid to noncontrolling
interests
Intercompany notes borrowing
Intercompany notes payments
Intercompany capital receipt
Intercompany capital distribution
Intercompany dividends
Other
Net cash provided by (used for) financing
activities
Effect of exchange rate changes on cash, cash
equivalents and restricted cash
(Decrease) increase in cash, cash equivalents
and restricted cash
Cash, cash equivalents and restricted cash
at beginning of period
Cash, cash equivalents and restricted cash
at end of period
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1.4)
(777.2)
(61.0)
—
—
—
(118.1)
—
—
—
(1,409.4)
411.2
(2.5)
1,005.9
—
0.2
52.4
—
—
—
—
—
—
—
(734.1)
5.0
(200.0)
—
—
(990.1)
—
—
2.4
(200.4)
—
8.3
(309.0)
3.5
(523.3)
523.3
—
—
19.4
(696.7)
—
1,257.4
(530.7)
400.4
—
—
1,127.1
—
998.4
—
—
—
—
—
—
—
—
—
—
—
(1,257.4)
530.7
(400.4)
—
1.4
—
—
—
(468.2)
50.8
—
—
—
(47.0)
734.1
(7.4)
200.4
—
(1.4)
0.4
—
421.8
—
742.6
— (1,657.1)
—
—
—
—
(206.6)
(26.9)
35.8
(93.0)
(403.2)
—
3.5
(3.5)
—
—
—
(3.2)
—
—
—
—
519.8
(519.8)
200.0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(778.6)
(1,588.5)
411.2
(2.5)
1,005.9
52.6
3.5
—
—
—
—
27.7
(868.7)
998.4
421.8
742.6
(2,331.9)
23.9
35.8
(93.0)
(403.2)
(47.0)
—
—
—
—
—
(2.8)
42.1
(33.5)
461.7
(1,125.7)
(655.4)
—
—
(19.4)
—
1.7
(2.1)
(44.7)
—
19.4
41.6
305.4
—
—
—
(2.1)
(62.4)
366.4
$
— $
— $
43.3 $
260.7 $
— $
304.0
122
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The condensed consolidating statements of cash flows for the year ended September 30, 2017 do not include
non-cash transactions between Parent, Issuer, Guarantor Subsidiaries and Non-Guarantor Subsidiaries. From
time to time, we may enter into non-cash transactions for simplicity of execution of intercompany transactions.
These may
intercompany non-cash returns of capital,
intercompany debt-to-equity conversions or other transactions of a similar nature. The table below summarizes
these non-cash transactions.
intercompany non-cash capitalizations,
include
Year Ended September 30, 2017
(In millions)
Parent
Issuer
Investing activities:
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
Intercompany notes issued
Intercompany notes proceeds
Intercompany capital investment
Intercompany return of capital
$
$
$
$
— $
— $
— $ 1,604.9 $
— $ (2,200.5) $
— $ 1,083.6 $
— $
— $
(2,908.0) $
1,556.2 $
(1,673.9) $
— $
— $
— $
1,673.9 $
(1,604.9) $
5,108.5 $
(2,639.8) $
Financing activities:
Intercompany notes borrowing
$
Intercompany notes payments
$
Intercompany capital receipt
$
Intercompany capital distribution $
Intercompany dividends paid
$
Note 15. Operating Leases
— $
— $
— $
— $
— $
69.0 $
— $
— $
— $
— $
1,604.9 $
(1,604.9) $
1,728.4 $
(1,083.6) $
(144.1) $
— $
— $
3,380.1 $
(1,556.2) $
(204.5) $
(1,673.9) $
1,604.9 $
(5,108.5) $
2,639.8 $
348.6 $
—
—
—
—
—
—
—
—
—
We lease certain manufacturing and warehousing facilities and equipment, primarily transportation equipment,
and office space under various operating leases. Some leases contain escalation clauses and provisions for lease
renewal. As of September 30, 2019, future minimum lease payments under all noncancelable operating leases for
the succeeding five fiscal years and thereafter are as follows (in millions):
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Thereafter
Total future minimum lease payments
$
$
214.3
180.1
136.3
108.3
85.3
206.1
930.4
Rental expense for the years ended September 30, 2019, 2018 and 2017 was approximately $346.7 million,
$243.7 million and $210.5 million, respectively, including lease payments under cancelable leases and
maintenance charges on transportation equipment.
Note 16. Special Purpose Entities
Pursuant to a sale of certain large-tract forestlands in 2007, a special purpose entity MWV Timber Notes
Holding, LLC (“MWV TN”) received, and WestRock assumed upon the Combination, an installment note receivable
in the amount of $398.0 million (“Timber Note”). The Timber Note does not require any principal payments until its
maturity in October 2027 and bears interest at a rate approximating LIBOR. In addition, the Timber Note is
supported by a bank-issued irrevocable letter of credit obtained by the buyer of the forestlands. The Timber Note is
not subject to prepayment in whole or in part prior to maturity. The bank’s credit rating as of October 2019 was
investment grade.
Using the Timber Note as collateral, MWV TN received $338.3 million in proceeds under a secured financing
agreement with a bank. Under the terms of the agreement, the liability from this transaction is non-recourse to the
123
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Company and is payable from the Timber Note proceeds upon its maturity in October 2027. As a result, the Timber
Note is not available to satisfy any obligations of WestRock. MWV TN can elect to prepay at any time the liability in
whole or in part, however, given that the Timber Note is not prepayable, MWV TN expects to only repay the liability
at maturity from the Timber Note proceeds.
The Timber Note and the secured financing liability were fair valued on the opening balance sheet in
connection with the Combination. As of September 30, 2019, the Timber Note was $369.1 million and is included
within restricted assets held by special purpose entities on the consolidated balance sheet and the secured
financing liability was $324.5 million and is included within non-recourse liabilities held by special purpose entities
on the consolidated balance sheet.
Pursuant to the sale of MWV’s remaining U.S. forestlands, which occurred on December 6, 2013, another
special purpose entity MWV Timber Notes Holding Company II, LLC (“MWV TN II”) received, and WestRock
assumed upon the Combination, an installment note receivable in the amount of $860.0 million (the “Installment
Note”). The Installment Note does not require any principal payments until its maturity in December 2023 and
bears interest at a fixed rate of 5.207%. However, at any time during a 180-day period following receipt by the
borrower of notice from us that we intend to withhold our consent to any amendment or waiver of this Installment
Note that was requested by the borrower and approved by any eligible assignees, the borrower may prepay the
Installment Note in whole but not in part for cash at 100% of the principal, plus accrued but unpaid interest,
breakage, or other similar amount if any. As of September 30, 2019, no event had occurred that would allow for the
prepayment of the Installment Note. We monitor the credit quality of the borrower and receive quarterly compliance
certificates. The borrower’s credit rating as of October 2019 was investment grade.
Using the Installment Note as collateral, MWV TN II received $774.0 million in proceeds under a secured
financing agreement with a bank. Under the terms of the agreement, the liability from this transaction is non-
recourse to WestRock and is payable from the Installment Note proceeds upon its maturity in December 2023. As
a result, the Installment Note is not available to satisfy any obligations of WestRock. MWV TN II can elect to
prepay, at any time, the liability in whole or in part, with sufficient notice, but would avail itself of this provision only
in the event the Installment Note was prepaid in whole or in part. The secured financing agreement however
requires a mandatory repayment, up to the amount of cash received, if the Installment Note is prepaid in whole or
in part.
The Installment Note and the secured financing liability were fair valued on the opening balance sheet in
connection with the Combination. As of September 30, 2019, the Installment Note was $905.2 million and is
included within restricted assets held by special purpose entities on the consolidated balance sheet and the
secured financing liability was $820.7 million and is included within non-recourse liabilities held by special purpose
entities on the consolidated balance sheet.
Note 17. Related Party Transactions
We sell products to affiliated companies. Net sales to the affiliated companies for the fiscal years ended
September 30, 2019, 2018 and 2017 were approximately $368.4 million, $418.8 million and $423.6 million,
respectively. Accounts receivable due from the affiliated companies at September 30, 2019 and 2018 was $23.0
million and $64.2 million, respectively, and was included in accounts receivable on our consolidated balance
sheets.
Note 18. Commitments and Contingencies
Capital Additions
Estimated costs for future purchases of fixed assets that we are obligated to purchase as of September 30,
2019 total approximately $623 million.
Environmental and Other Matters
Environmental compliance requirements are a significant factor affecting our business. We employ
manufacturing processes that result in various discharges, emissions and wastes. These processes are subject to
124
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
numerous federal, state, local and international environmental laws and regulations, as well as the requirements of
environmental permits and similar authorizations issued by various governmental authorities.
On January 31, 2013, the EPA published Boiler MACT. Boiler MACT required compliance by January 31, 2016
or by January 31, 2017 for those mills for which we obtained a prior compliance extension. All work required for our
boilers to comply with the rule has been completed. On July 29, 2016, the U.S. Court of Appeals for the District of
Columbia Circuit issued a ruling on the consolidated cases challenging Boiler MACT. The court vacated key
portions of the rule, including emission limits for certain subcategories of solid fuel boilers, and remanded other
issues to the EPA for further rulemaking. At this time, we cannot predict with certainty how this decision will impact
our existing Boiler MACT strategies or whether we will incur additional costs to comply with any revised Boiler
MACT standards.
In addition to Boiler MACT, we are subject to several other federal, state, local and international environmental
rules that may impact our business, including the National Ambient Air Quality Standards for nitrogen oxide, sulfur
dioxide, fine particulate matter and ozone for facilities in the U.S.
We are involved in various administrative proceedings relating to environmental matters that arise in the
normal course of business, and we may become involved in similar matters in the future. Although the ultimate
outcome of these proceedings cannot be predicted with certainty and we cannot at this time estimate any
reasonably possible losses based on available information, we do not believe that the currently expected outcome
of any environmental proceedings and claims that are pending or threatened against us will have a material
adverse effect on our results of operations, financial condition or cash flows.
CERCLA and Other Remediation Costs
We face potential liability under federal, state, local and international laws as a result of releases, or threatened
releases, of hazardous substances into the environment from various sites owned and operated by third parties at
which Company-generated wastes have allegedly been deposited. Generators of hazardous substances sent to
off-site disposal locations at which environmental problems exist, as well as the owners of those sites and certain
other classes of persons, are liable for response costs for the investigation and remediation of such sites under
CERCLA and analogous laws. While joint and several liability is authorized under CERCLA, liability is typically
shared with other PRPs and costs are commonly allocated according to relative amounts of waste deposited and
other factors.
In addition, certain of our current or former locations are being investigated or remediated under various
environmental laws, including CERCLA. Based on information known to us and assumptions, we do not believe
that the costs of these projects will have a material adverse effect on our results of operations, financial condition
or cash flows. However, the discovery of contamination or the imposition of additional obligations, including natural
resources damaged at these or other sites in the future could result in additional costs.
On January 26, 2009, Smurfit-Stone, which we acquired in fiscal 2011 and certain of its subsidiaries filed a
voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. Smurfit-Stone’s Canadian subsidiaries
also filed to reorganize in Canada. We believe that matters relating to previously identified third-party PRP sites
and certain facilities formerly owned or operated by Smurfit-Stone have been satisfied by claims in the Smurfit-
Stone bankruptcy proceedings. However, we may face additional liability for cleanup activity at sites that are not
subject to the bankruptcy discharge, but are not currently identified. The final bankruptcy distributions were made
in fiscal 2018.
We believe that we can assert claims for indemnification pursuant to existing rights we have under purchase
and other agreements in connection with certain remediation sites. In addition, we believe that we have insurance
coverage, subject to applicable deductibles/retentions, policy limits and other conditions, for certain environmental
matters. However, there can be no assurance that we will be successful with respect to any claim regarding these
insurance or indemnification rights or that, if we are successful, any amounts paid pursuant to the insurance or
indemnification rights will be sufficient to cover all our costs and expenses. We also cannot predict with certainty
whether we will be required to perform remediation projects at other locations, and it is possible that our
remediation requirements and costs could increase materially in the future and exceed current reserves. In
addition, we cannot currently assess with certainty the impact that future changes in cleanup standards or federal,
125
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
state or other environmental laws, regulations or enforcement practices will have on our results of operations,
financial condition or cash flows.
As of September 30, 2019, we had $10.8 million reserved for environmental liabilities on an undiscounted
basis, of which $5.6 million is included in other long-term liabilities and $5.2 million is included in other current
liabilities, including amounts accrued in connection with environmental obligations relating to manufacturing
facilities that we have closed. We believe the liability for these matters was adequately reserved at September 30,
2019.
Climate Change
Certain jurisdictions in which we have manufacturing facilities or other investments have taken actions to
address climate change. The EPA has issued the Clean Air Act permitting regulations applicable to certain facilities
that emit GHG. The EPA also has promulgated a rule requiring certain industrial facilities that emit 25,000 metric
tons or more of carbon dioxide equivalent per year to file an annual report of their emissions. While we have
facilities subject to existing GHG permitting and reporting requirements, the impact of these requirements has not
been material to date.
Additionally, the EPA has been working on rulemakings aimed at cutting carbon emissions from power plants.
On June 20, 2019, the EPA issued the final ACE rule, which establishes emission guidelines for states to use in
developing plans to address greenhouse gas emissions from existing coal-fired power plants. The ACE rule
replaced a final rule issued by the EPA in 2015 establishing GHG emission guidelines for existing electric utility
generating units, which was stayed by the U.S. Supreme Court and has never gone into effect. Although the ACE
rule does not apply directly to the power generation facilities at our mills, it has the potential to increase the cost of
purchased electricity for our manufacturing operations and change the treatment of certain types of biomass that
are currently considered carbon neutral. Due to uncertainties regarding the implementation of the ACE rule, its
potential impacts on us cannot be quantified with certainty at this time.
In addition to national efforts to regulate climate change, some U.S. states in which we have manufacturing
operations are taking measures to reduce GHG emissions, such as requiring GHG emissions reporting or
developing regional cap-and trade programs. California has enacted a cap-and-trade program that took effect in
2012, and includes enforceable compliance obligations that began in 2013. In 2017, California extended the cap-
and-trade program to 2030. We do not have any manufacturing facilities that are subject to the cap-and-trade
requirements in California; however, we are continuing to monitor the implementation of this program as well as
proposed mandatory GHG reduction efforts in other states. The Washington Department of Ecology issued a final
rule, known as the Clean Air Rule, in 2016, which applies to GHGs from facilities that have average annual carbon
dioxide equivalent emissions equal to or exceeding 100,000 metric tons/year. Energy intensive and trade exposed
facilities, including our Tacoma, WA and Longview, WA mills, and transportation fuel importers are subject to
regulation under this program. Various groups filed lawsuits against the Washington Department of Ecology
challenging the Clean Air Rule, and in 2018, the Thurston County Superior Court invalidated the Clean Air Rule.
The case was argued before the Supreme Court on March 19, 2019, and an opinion is expected before the end of
2019. The Washington Department of Ecology subsequently filed an appeal with the State Supreme Court.
Implementation of the Clean Air Rule has been stayed while the appeal is pending. In June 2019, the State of New
York passed the CLCPA. This legislation, which becomes effective in January 2020, commits the state to reaching
net zero GHG emissions, with interim goals of a 40% reduction in absolute terms from 1990 levels by 2030 and an
85% reduction by 2050. Our Solvay, NY mill could be affected by the implementation of the CLCPA, although we
cannot currently quantify any impacts due to uncertainties regarding implementation of the law. The Virginia
Department of Environmental Quality has issued regulations that would link the Commonwealth to the RGGI,
which is a nine-state, market-based carbon cap-and-trade program. Although industrial facilities like our paper
mills and converting facilities in Virginia would be exempt from the RGGI regulations, electric generating units and
utilities subject to the RGGI carbon reduction requirements may incur increased costs that could be passed on to
ratepayers like our industrial facilities in Virginia. The State Air Pollution Control Board approved the final RGGI
carbon trading regulations in April 2019; however, legislative amendments made to Virginia’s 2019 budget
currently block the use of state funds to join RGGI or any climate change compacts, and to prevent using any cap-
and-trade revenue without General Assembly approval. In September 2019, Governor Ralph Northam issued EO
43, setting goals for Virginia to generate 30 percent of its electricity from carbon-free sources by 2030 and 100
percent by 2050. EO 43 directs various state agencies, including the Department of Environmental Quality, to
126
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
develop a plan of action to meet these energy goals and address related issues such as energy storage, energy
efficiency and environmental justice.
The Paris Agreement established a framework for reducing global GHG emissions. By signing the Paris
Agreement, the U.S. made a non-binding commitment to reduce economy-wide GHG emissions by 26% to 28%
below 2005 levels by 2025. Other countries in which we conduct business, including China, European Union
member states and India, have set GHG reduction targets. The Paris Agreement became effective in November
2016. Although a party to the agreement may not provide the required one-year notice of withdrawal until three
years after the effective date, in 2017, President Trump announced that the U.S. intended to withdraw from the
Paris Agreement. At this time, it is not possible to determine how the Paris Agreement, or any potential U.S.
commitments in lieu of those under the agreement, may impact U.S. industrial facilities, including our domestic
operations.
Several of our international facilities are located in countries that have already adopted GHG emissions trading
schemes. For example, Quebec has become a member of the Western Climate Initiative, which is a collaboration
among California and certain Canadian provinces that have joined together to create a cap-and-trade program to
reduce GHG emissions. In 2009, Quebec adopted a target of reducing GHG emissions by 20% below 1990 levels
by 2020 and 37.5% from 1990 levels by 2030. In 2011, Quebec issued a final regulation establishing a regional
cap-and-trade program that required reductions in GHG emissions from covered emitters as of January 1, 2013.
Our mill in Quebec is subject to these cap-and-trade requirements, although the direct impact of this regulation has
not been material to date. Compliance with this program and other similar programs may require future
expenditures to meet required GHG emission reduction requirements in future years.
Regulation related to climate change continues to develop in the areas of the world where we conduct
business. We have systems in place for tracking the GHG emissions from our energy-intensive facilities, and we
carefully monitor developments in climate related laws, regulations and policies to assess the potential impact of
such developments on our results of operations, financial condition, cash flows and disclosure obligations.
Litigation
A lawsuit filed in the U.S. District Court of the Northern District of Illinois in 2010 alleged that certain named
defendants violated the Sherman Act by conspiring to limit the supply and fix the prices of containerboard and
products containing containerboard from February 15, 2004 through November 8, 2010 (the “Antitrust
Litigation”). WestRock CP, LLC, as the successor to Smurfit-Stone, was a named defendant with respect to the
period after Smurfit-Stone’s discharge from bankruptcy on June 30, 2010 through November 8, 2010. The
complaint sought treble damages and costs, including attorney’s fees. In March 2015, the court granted the
plaintiffs’ motion for class certification. On January 9, 2017, the defendants filed individual and joint Motions for
Summary Judgment in the District Court. On August 3, 2017, the District Court granted our Motion for Summary
Judgment and entered a judgment in our favor with respect to all claims against us. The U.S. Court of Appeals for
the Seventh Circuit affirmed the District Court’s decision on December 7, 2018. Plaintiff’s time to appeal this
affirmation expired on March 7, 2019. Accordingly, the Order of the District Court granting summary judgment and
our complete dismissal became final. Additionally, the District Court ordered entry of stipulation of the parties that
required the plaintiffs to reimburse us for costs of approximately $0.1 million.
We have been named a defendant in asbestos-related personal injury litigation. To date, the costs resulting
from the litigation, including settlement costs, have not been significant. As of September 30, 2019, there were
approximately 825 such lawsuits. We believe that we have substantial insurance coverage, subject to applicable
deductibles and policy limits, with respect to asbestos claims. We also have valid defenses to these asbestos-
related personal injury claims and intend to continue to defend them vigorously. Should the volume of litigation
grow substantially, it is possible that we could incur significant costs resolving these cases. We do not expect the
resolution of pending asbestos litigation and proceedings to have a material adverse effect on our results of
operations, financial condition or cash flows. In any given period or periods, however, it is possible such
proceedings or matters could have a material adverse effect on our results of operations, financial condition or
cash flows.
We are a defendant in a number of other lawsuits and claims arising out of the conduct of our business. While
the ultimate results of such suits or other proceedings against us cannot be predicted with certainty, we believe the
127
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
resolution of these other matters will not have a material adverse effect on our results of operations, financial
condition or cash flows.
Brazil Tax Liability
On October 4, 2019, we filed an annulment action in federal tax court challenging an administrative decision of
the Brazil Administrative Council of Tax Appeals (“CARF”). This federal court action arises from a claim that a
subsidiary of MeadWestvaco had reduced its tax liability related to the goodwill generated by the 2002 merger of
two subsidiaries in Brazil. The matter has proceeded through the CARF principally in two proceedings, covering
tax years 2003 to 2008 and 2009 to 2012. On August 6, 2019, CARF published a decision finding us liable for
underpayment of tax and interest with respect to the period 2009 to 2012. Certain aspects of the two cases remain
pending before CARF, including the dispute related to tax years 2003 to 2008, and penalties relating to tax years
2009 to 2012. The total amount in dispute before CARF and in the annulment action relating to the claimed tax
deficiency is R$678 million ($163 million) as of September 30, 2019, including penalties and interest. We assert
that we have no liability in these matters. Our uncertain tax position reserve for this matter is included in the
unrecognized tax benefits table in “Note 6. Income Taxes”. Resolution of the uncertain tax positions could have a
material adverse effect on our cash flows or materially benefit our results of operations in future periods depending
upon their ultimate resolution.
Guarantees
We make certain guarantees in the normal course of conducting our operations, for compliance with certain
laws and regulations, or in connection with certain business dispositions. The guarantees include items such as
funding of net losses in proportion to our ownership share of certain joint ventures, debt guarantees related to
certain unconsolidated entities acquired in acquisitions, indemnifications of lessors in certain facilities and
equipment operating leases for items such as additional taxes being assessed due to a change in tax law and
certain other agreements. We estimate our exposure to these matters could be approximately $50 million. As of
September 30, 2019, we had recorded $10.1 million for the estimated fair value of these guarantees. We are
unable to estimate our maximum exposure under operating leases because it is dependent on potential changes in
the tax laws; however, we believe our exposure related to guarantees would not have a material impact on our
results of operations, financial condition or cash flows.
Indirect Tax Claim
In March 2017, the Supreme Court of Brazil issued a decision concluding that certain state value added tax
should not be included in the calculation of federal gross receipts taxes. Subsequently, in fiscal 2019, the Supreme
Court of Brazil rendered favorable decisions on six of our cases granting us the right to recover certain state value
added tax. We believe the decision reduced our gross receipts tax in Brazil prospectively and retrospectively, and
will allow us to recover tax amounts collected by the government. Based on our preliminary evaluation and the
opinion of our tax and legal advisors, in the fourth quarter of fiscal 2019 we recorded a $12.2 million receivable for
our expected recovery and interest primarily as a reduction of cost of goods sold for the period March 2017 to
September 2019. We are still evaluating the impact of the court’s decision on periods prior to March 2017 and may
record additional amounts in the future as we complete our analysis.
128
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 19. Accumulated Other Comprehensive Loss and Other Comprehensive Income
The following table summarizes the changes in accumulated other comprehensive loss by component for the
fiscal years ended September 30, 2019 and 2018 (in millions):
Deferred
(Loss) Income
on Cash
Flow Hedges
Defined Benefit
Pension and
Postretirement
Plans
Foreign
Currency
Items
$
(0.7) $
(462.5) $
5.2 $
Available
for Sale
Security Total
0.7 $
(1)
(457.3)
—
(18.6)
(234.4)
0.8
(252.2)
0.5
15.2
—
(1.5)
14.2
0.5
(0.2) $
(3.4)
(465.9) $
(234.4)
(229.2) $
(0.7)
— $
(238.0)
(695.3)
1.1
(250.7)
(142.7)
—
(392.3)
(0.2)
18.6
—
—
18.4
0.9
0.7 $
(232.1)
(698.0) $
(142.7)
(371.9) $
—
(373.9)
— $ (1,069.2)
Balance at September 30, 2017
Other comprehensive (loss) income before
reclassifications
Amounts reclassified from accumulated
other comprehensive loss (income)
Net current period other comprehensive
income (loss)
Balance at September 30, 2018
Other comprehensive income (loss) before
$
reclassifications
Amounts reclassified from accumulated
other comprehensive (income) loss
Net current period other comprehensive
income (loss)
Balance at September 30, 2019
$
(1) All amounts are net of tax and noncontrolling interest.
The following table summarizes the reclassifications out of accumulated other comprehensive loss by
component for the fiscal years ended September 30, 2019 and 2018 (in millions):
Years Ended September 30,
2019
2018
Pre-Tax Tax
Net of
Tax
Pre-Tax Tax
Net of
Tax
Amortization of defined benefit pension and
postretirement items: (1)
Actuarial losses (2)
Prior service costs (2)
Subtotal defined benefit plans
Available for sale security (1)(3)
Derivative Instruments: (1)
$
(22.7)
(2.4)
(25.1)
—
5.9 $
0.6
6.5
—
(16.8) $
(1.8)
(18.6)
—
(20.9)
(0.3)
(21.2)
1.5
Interest rate swap hedge gain (4)
Foreign currency cash flow hedge loss (5)
Total reclassifications for the period
$
0.3
—
(24.8) $
(0.1)
—
6.4 $
0.2
—
(18.4) $
—
(0.7)
(20.4) $
5.9 $
0.1
6.0
—
—
0.2
6.2 $
(15.0)
(0.2)
(15.2)
1.5
—
(0.5)
(14.2)
(1) Amounts in parentheses indicate charges to earnings. Amounts pertaining to noncontrolling interests are excluded.
(2) These accumulated other comprehensive income components are included in the computation of net periodic pension
cost. See “Note 5. Retirement Plans” for additional details.
(3) These accumulated other comprehensive income components are included in other income, net.
(4) These accumulated other comprehensive income components are included in interest expense, net.
(5) These accumulated other comprehensive income components are included in net sales.
129
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A summary of the components of other comprehensive (loss) income, including noncontrolling interest, for the
years ended September 30, 2019, 2018 and 2017, is as follows (in millions):
Fiscal 2019
Foreign currency translation loss
Deferred gain on cash flow hedges
Reclassification adjustment of net gain on cash flow hedges
included in earnings
Net actuarial loss arising during period
Amortization and settlement recognition of net actuarial loss
Prior service cost arising during the period
Amortization of prior service cost
Consolidated other comprehensive loss
Less: Other comprehensive loss attributable to noncontrolling
interests
Other comprehensive loss attributable to common
stockholders
Fiscal 2018
Foreign currency translation loss
Reclassification adjustment of net loss on cash flow hedges
included in earnings
Net actuarial loss arising during period
Amortization and settlement recognition of net actuarial loss
Prior service cost arising during the period
Amortization of prior service cost
Unrealized gain on available for sale security
Reclassification adjustment of net gain on available for sale
security included in earnings
Consolidated other comprehensive loss
Less: Other comprehensive income attributable to noncontrolling
interests
Other comprehensive loss attributable to common
stockholders
Fiscal 2017
Foreign currency translation gain
Sale of HH&B, foreign currency
Reclassification adjustment of net gain on cash flow hedges
included in earnings
Net actuarial gain arising during period
Amortization and settlement recognition of net actuarial loss
Prior service credit arising during the period
Amortization of prior service credit
Unrealized gain on available for sale security
Sale of HH&B, defined benefit pension plans
Consolidated other comprehensive income
Less: Other comprehensive income attributable to noncontrolling
interests
Other comprehensive income attributable to common
stockholders
Pre-Tax
$
(143.4) $
1.5
Tax
Net of Tax
(143.4)
1.1
— $
(0.4)
(0.3)
(335.9)
23.3
(3.9)
2.4
(456.3)
0.1
87.4
(6.1)
0.6
(0.6)
81.0
(0.2)
(248.5)
17.2
(3.3)
1.8
(375.3)
1.5
(0.1)
1.4
$
(454.8) $
80.9 $
(373.9)
Pre-Tax
$
(234.4) $
Tax
Net of Tax
(234.4)
— $
0.7
(29.0)
20.9
(7.8)
0.3
0.8
(1.5)
(250.0)
(0.2)
15.9
(5.9)
2.3
(0.1)
—
—
12.0
0.5
(13.1)
15.0
(5.5)
0.2
0.8
(1.5)
(238.0)
—
—
—
$
(250.0) $
12.0 $
(238.0)
Pre-Tax
$
80.7 $
26.8
Tax
Net of Tax
80.7
26.8
— $
—
(0.8)
34.1
56.4
1.0
(0.4)
0.7
4.2
202.7
0.3
(11.9)
(20.4)
(0.3)
0.2
—
(1.3)
(33.4)
(0.5)
22.2
36.0
0.7
(0.2)
0.7
2.9
169.3
(0.2)
—
(0.2)
$
202.5 $
(33.4) $
169.1
130
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 20. Stockholders’ Equity
Capitalization
Our capital stock consists solely of Common Stock. Holders of our Common Stock are entitled to one vote per
share. Our amended and restated certificate of incorporation also authorizes preferred stock, of which no shares
have been issued. The terms and provisions of such shares will be determined by our board of directors upon any
issuance of such shares in accordance with our certificate of incorporation.
Stock Repurchase Plan
In July 2015, our board of directors authorized a repurchase program of up to 40.0 million shares of our
Common Stock, representing approximately 15% of our outstanding Common Stock as of July 1, 2015. The shares
of our Common Stock may be repurchased over an indefinite period of time at the discretion of management. In
fiscal 2019, we repurchased approximately 2.1 million shares of our Common Stock for an aggregate cost of $88.6
million. In fiscal 2018, we repurchased approximately 3.4 million shares of our Common Stock for an aggregate
cost of $195.1 million. In fiscal 2017, we repurchased approximately 1.8 million shares of our Common Stock for an
aggregate cost of $93.0 million. As of September 30, 2019, we had remaining authorization under the repurchase
program authorized in July 2015 to purchase approximately 19.1 million shares of our Common Stock.
Note 21. Share-Based Compensation
Share-based Compensation Plans
At our Annual Meeting of Stockholders held on February 2, 2016, our stockholders approved the WestRock
Company 2016 Incentive Stock Plan. The 2016 Incentive Stock Plan was amended and restated on February 2,
2018 (the “Amended and Restated 2016 Incentive Stock Plan”). The Amended and Restated 2016 Incentive
Stock Plan allows for the granting of options, restricted stock, SARs and restricted stock units to certain key
employees and directors.
The table below shows the approximate number of shares: available for issuance, available for future grant, to
be issued if restricted awards granted with a performance condition recorded at target achieve the maximum
award, and if new grants pursuant to the plan are expected to be issued, each as adjusted as necessary for
corporate actions (in millions).
Amended and Restated 2016 Incentive Stock Plan (1)
2004 Incentive Stock Plan (1)(2)
2005 Performance Incentive Plan (1)(2)
RockTenn (SSCC) Equity Inventive Plan (1)(3)
11.7
15.8
12.8
7.9
5.1
3.1
9.0
5.9
Shares
Available
For
Issuance
Shares
Available
For Future
Grant
Shares To Be
Issued If
Performance
Is Achieved At
Maximum
2.3
0.0
0.0
0.0
Expect To
Make
New
Awards
Yes
No
No
No
(1) As part of the Separation, equity-based incentive awards were generally adjusted to maintain the intrinsic value of
awards immediately prior to the Separation. The number of unvested restricted stock awards and unexercised stock
options and SARs at the time of the Separation were increased by an exchange factor of approximately 1.12. In
addition, the exercise price of unexercised stock options and SARs at the time of the Separation was converted to
decrease the exercise price by an exchange factor of approximately 1.12.
(2)
(3)
In connection with the Combination, WestRock assumed all RockTenn and MWV equity incentive plans. We issued
awards to certain key employees and our directors pursuant to our RockTenn 2004 Incentive Stock Plan, as amended,
and our MWV 2005 Performance Incentive Plan, as amended. The awards were converted into WestRock awards
using the conversion factor as described in the Business Combination Agreement.
In connection with the Smurfit-Stone acquisition, we assumed the Smurfit-Stone equity incentive plan, which was
renamed the Rock-Tenn Company (SSCC) Equity Incentive Plan. The awards were converted into shares of
RockTenn common stock, options and restricted stock units, as applicable, using the conversion factor as described in
the merger agreement.
131
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our results of operations for the fiscal years ended September 30, 2019, 2018 and 2017 include share-based
compensation expense of $64.2 million, $66.8 million and $60.9 million, respectively, including $2.9 million
included in the gain on sale of HH&B in fiscal 2017. Share-based compensation expense in fiscal 2017 was
reduced by $5.4 million for the rescission of shares granted to our CEO that were inadvertently granted in excess
of plan limits in fiscal 2014 and 2015. The total income tax benefit in the results of operations in connection with
share-based compensation was $16.3 million, $19.4 million and $22.5 million, for the fiscal years ended
September 30, 2019, 2018 and 2017, respectively.
Cash received from share-based payment arrangements for the fiscal years ended September 30, 2019, 2018
and 2017 was $61.5 million, $44.4 million and $59.2 million, respectively.
Equity Awards Issued in Connection with Acquisitions
In connection with the KapStone Acquisition, we replaced certain outstanding awards of restricted stock units
granted under the KapStone long-term incentive plan with WestRock stock options and restricted stock units. No
additional shares will be granted under the KapStone plan. The KapStone equity awards were replaced with
awards with identical terms utilizing an approximately 0.83 conversion factor as described in the Merger
Agreement. The acquisition consideration included approximately $70.8 million related to outstanding KapStone
equity awards related to service prior to the effective date of the KapStone Acquisition – the balance related to
service after the effective date will be expensed over the remaining service period of the awards.
As part of the KapStone Acquisition, we issued 2,665,462 options that were valued at a weighted average fair
value of $20.99 per share using the Black-Scholes option pricing model. The weighted average significant
assumptions used were:
Expected term in years
Expected volatility
Risk-free interest rate
Dividend yield
2019
3.1
27.7%
3.0%
4.1%
In connection with the MPS Acquisition, we replaced certain outstanding awards of restricted stock units
granted under the MPS long-term incentive plan with WestRock restricted stock units. No additional shares will be
granted under the MPS plan. The MPS equity awards were replaced with identical terms utilizing an approximately
0.33 conversion factor as described in the merger agreement. As part of the MPS Acquisition, we granted 119,373
awards of restricted stock units, which contain service conditions and were valued at $54.24 per share. The
acquisition consideration included approximately $1.9 million related to outstanding MPS equity awards related to
service prior to the effective date of the MPS Acquisition – the balance related to service after the effective date will
be expensed over the remaining service period of the awards.
Stock Options and Stock Appreciation Rights
Stock options granted under our plans generally have an exercise price equal to the closing market price on
the date of the grant, generally vest in three years, in either one tranche or in approximately one-third increments,
and have 10-year contractual terms. However, a portion of our grants are subject to earlier expense recognition
due to retirement eligibility rules. Presently, other than circumstances such as death, disability and retirement,
grants will include a provision requiring both a change of control and termination of employment to accelerate
vesting.
At the date of grant, we estimate the fair value of stock options granted using a Black-Scholes option pricing
model. We use historical data to estimate option exercises and employee terminations in determining the expected
term in years for stock options. Expected volatility is calculated based on the historical volatility of our stock. The
risk-free interest rate is based on U.S. Treasury securities in effect at the date of the grant of the stock options. The
dividend yield is estimated based on our historic annual dividend payments and current expectations for the future.
Other than in connection with replacement awards in connection with acquisitions, we did not grant any stock
options in fiscal 2019, 2018 and 2017.
132
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The table below summarizes the changes in all stock options during the fiscal year ended September 30,
2019:
Outstanding at September 30, 2018
Granted
Exercised
Expired
Forfeited
Outstanding at September 30, 2019
Exercisable at September 30, 2019
Vested and expected to vest at September 30, 2019
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
(in millions)
Weighted
Average
Exercise
Price
33.75
22.06
21.38
42.04
26.52
33.32
33.48
33.33
3.7 $
3.6 $
3.7 $
26.7
25.7
26.7
Stock
Options
4,253,654 $
2,665,462
(2,403,217)
(84,560)
(35,162)
4,396,177 $
4,296,067 $
4,394,409 $
The aggregate intrinsic value of options exercised during the years ended September 30, 2019, 2018 and
2017 was $44.5 million, $67.4 million and $54.3 million, respectively.
As of September 30, 2019, there was $0.5 million of total unrecognized compensation cost related to
nonvested stock options; that cost is expected to be recognized over a weighted average remaining vesting period
of 0.5 years. We amortize these costs on a straight-line basis over the explicit service period.
As part of the Combination, we issued SARs to replace outstanding MWV SARs. The SARs were valued using
the Black-Scholes option pricing model. We measure compensation expense related to the SAR awards at the end
of each period. We do not expect to issue additional SARs.
The table below summarizes the changes in all SARs during the fiscal year ended September 30, 2019:
Outstanding at September 30, 2018
Exercised
Expired
Outstanding at September 30, 2019
Exercisable at September 30, 2019
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
(in millions)
Weighted
Average
Exercise
Price
SARs
36,986 $
—
(2,014)
34,972 $
34,972 $
27.36
—
9.02
28.41
28.41
1.5 $
1.5 $
0.3
0.3
The aggregate intrinsic value of SARs exercised during the years ended September 30, 2019, 2018 and 2017
was zero, $0.5 million and $0.4 million, respectively.
Restricted Stock
Restricted stock is typically granted annually to non-employee directors and certain of our employees. Our
non-employee director awards generally vest over a period of up to one year and are treated as issued and carry
dividend and voting rights until they vest. The vesting provisions for our employee awards may vary from grant to
grant; however, vesting generally is contingent upon meeting various service and/or performance or market goals
including, but not limited to, achievement of various financial targets including Cash Flow Per Share, Cash Flow to
Equity Ratio and relative Total Shareholder Return (each as defined in the award documents). Subject to the level
of performance attained, the target award for some of the grants may increase up to 200% of target or decrease to
133
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
zero depending upon the terms of the individual grant. The employee grants generally vest in three years.
Presently, other than circumstances such as death, disability and retirement, the grants generally include a
provision requiring both a change of control and termination of employment to accelerate vesting. For certain
employee grants, the grantee is entitled to receive dividend equivalent units, but will generally forfeit the restricted
award and the dividend equivalents if the employee separates from us during the vesting period or if the
predetermined goals are not accomplished.
The table below summarizes the changes in unvested restricted stock during the fiscal year ended
September 30, 2019:
Unvested at September 30, 2018 (1)
Granted
Vested
Forfeited
Unvested at September 30, 2019 (1)
Weighted
Average
Grant Date Fair
Value
51.01
38.71
34.51
50.43
51.94
$
Shares/Units
3,224,174
3,673,445
(2,933,556)
(318,525)
$
3,645,538
(1) Target awards granted with a performance condition, net of subsequent forfeitures, may be increased up to 200% of the
target or decreased to zero, subject to the level of performance attained. The awards are reflected in the table at the target
award amount of 100%. Based on current facts and assumptions we are forecasting the performance of the grants to be
attained at levels less than target. However, it is possible that the performance attained may vary.
There was approximately $80.5 million of unrecognized compensation cost related to all unvested restricted
shares as of September 30, 2019 that will be recognized over a weighted average remaining vesting period of 1.5
years.
The following table represents a summary of restricted stock shares granted in fiscal 2019, 2018 and 2017 with
terms defined in the applicable grant letters. The shares are not deemed to be issued and carry voting rights until
the relevant conditions defined in the award documents have been met, unless otherwise noted.
Shares of restricted stock granted to non-employee directors (1)
Shares of restricted stock granted to employees:
Shares granted for attainment of a performance condition at
an amount in excess of target (2)
Shares granted with a service condition and a Cash Flow Per
Share performance condition at target (3)
Shares granted with a service condition and a relative Total
Shareholder Return market condition at target (3)
Shares granted with a service condition (4)
Share of restricted stock assumed in purchase accounting:
2019
2018
2017
39,792
23,285
26,521
1,149,592
45,964
340,319
652,465
432,655
507,070
407,300
682,264
259,695
354,512
301,980
309,850
Shares granted with a service condition (5)
Total restricted stock granted
742,032
3,673,445
—
1,116,111
119,373
1,605,113
(1) Non-employee director grants generally vest over a period of up to one year and are deemed issued on the grant date and
have voting and dividend rights.
(2) Shares granted in the table above include shares subsequently issued for the level of performance attained in excess of
target. Shares issued in fiscal 2019 for the fiscal 2016 Cash Flow Per Share were at 200% of target. Shares issued in fiscal
2018 for the fiscal 2015 Cash Flow Per Share were at 103.7% of target. Shares issued in fiscal 2017 for the fiscal 2014
Cash Flow Per Share were at 176.6% of target. Shares issued in fiscal 2017 also include shares accelerated for terminated
employees primarily as a result of the Combination, which were achieved at between 146.5% and 200% of target.
(3) These employee grants vest over approximately three years and have adjustable ranges from 0 - 200% of target subject to
the level of performance attained in the respective award agreement. The employee grants with a relative Total
134
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Shareholder Return condition were valued using a Monte Carlo simulation, the terms of which are outlined below.
(4) These shares vest over approximately three to four years.
(5) These shares vest over approximately one to three years.
The employee grants with a relative Total Shareholder Return market condition in fiscal 2019 were valued
using a Monte Carlo simulation at $42.64 per share. The significant assumptions used in valuing these grants
included: an expected term of 2.9 years, an expected volatility of 27.2% and a risk-free interest rate of 2.4%. We
amortize these costs on a straight-line basis over the explicit service period.
The employee grants with a relative Total Shareholder Return market condition in fiscal 2018 were valued
using a Monte Carlo simulation at $66.28 per share. The significant assumptions used in valuing these grants
included: an expected term of 2.9 years, an expected volatility of 29.7% and a risk-free interest rate of 2.3%. We
amortize these costs on a straight-line basis over the explicit service period.
The employee grants with a relative Total Shareholder Return market condition in fiscal 2017 were valued
using a Monte Carlo simulation at $64.41 per share. The significant assumptions used in valuing these grants
included: an expected term of 2.9 years, an expected volatility of 30.6% and a risk-free interest rate of 1.4%. We
amortize these costs on a straight-line basis over the explicit service period.
Expense is recognized on restricted stock grants on a straight-line basis over the explicit service period or for
performance based grants over the explicit service period when we estimate that it is probable the performance
conditions will be satisfied. Expense recognized on grants with a performance condition that affects how many
shares are ultimately awarded is based on the number of shares expected to be awarded.
The following table represents a summary of restricted stock vested in fiscal 2019, 2018 and 2017 (in millions,
except shares):
Shares of restricted stock vested
Aggregate fair value of restricted stock vested
2019
2,933,556
115.2 $
2018
697,717
46.1 $
2017
1,112,909
59.5
$
The shares vested in fiscal 2019 reflect the vesting of the fiscal 2016 grants, with a Cash Flow Per Share
performance condition that vested at 200% of target, as well as certain shares with a performance and/or service
condition. The shares vested in fiscal 2018 reflect the vesting of the fiscal 2015 grants, with a Cash Flow Per Share
performance condition that vested at 103.7% of target, as well as certain shares with a performance and/or service
condition, including those shares assumed upon the Combination. The shares vested in 2017 reflect the vesting of
the fiscal 2014 grant, with a Cash Flow Per Share performance condition that vested at 176.6% of target, certain
shares assumed upon the Combination with a performance and/or service condition, as well as other awards
accelerated in connection with the Combination for certain former employees.
Employee Stock Purchase Plan
At our Annual Meeting of Stockholders held on February 2, 2016, our stockholders approved the WestRock
Company Employee Stock Purchase Plan (“ESPP”). Under the ESPP, shares of Common Stock are reserved for
purchase by our qualifying employees. The ESPP allowed for the purchase of a total of approximately 2.5 million
shares of Common Stock. During fiscal 2019, 2018 and 2017, employees purchased approximately 0.4 million, 0.2
million and 0.2 million shares, respectively, under the ESPP. We recognized $1.2 million, $1.6 million and $1.3
million of expense for fiscal 2019, 2018 and 2017, respectively, related to the 15% discount on the purchase price
allowed to employees. As of September 30, 2019, adjusted for the Separation, approximately 2.0 million shares of
Common Stock remained available for purchase under the ESPP.
135
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 22. Earnings per Share
The restricted stock awards that we grant to non-employee directors are considered participating securities as
they receive non-forfeitable rights to dividends at the same rate as our Common Stock. As participating securities,
we include these instruments in the earnings allocation in computing earnings per share under the two-class
method described in ASC 260, “Earnings per Share.” The following table sets forth the computation of basic and
diluted earnings per share under the two-class method (in millions, except per share data):
2019
September 30,
2018
2017
Numerator:
Net income attributable to common stockholders
Less: Distributed and undistributed income available to
participating securities
Distributed and undistributed income available to
common stockholders
$
862.9 $
1,906.1 $
708.2
(0.1)
(0.2)
(0.1)
$
862.8 $
1,905.9 $
708.1
Denominator:
Basic weighted average shares outstanding
Effect of dilutive stock options and non-participating securities
Diluted weighted average shares outstanding
256.6
2.5
259.1
255.5
4.3
259.8
252.2
3.5
255.7
Basic earnings per share attributable to common
stockholders
Diluted earnings per share attributable to common
stockholders
$
$
3.36 $
7.46 $
2.81
3.33 $
7.34 $
2.77
Weighted average shares include zero and 0.2 million of reserved, but unissued shares at September 30,
2018 and 2017, respectively. These reserved shares were distributed as claims were liquidated or resolved in
accordance with the resolution of Smurfit-Stone bankruptcy claims. The final bankruptcy distributions were made in
fiscal 2018.
Options and restricted stock in the amount of 1.3 million, 0.2 million and 0.7 million common shares in fiscal
2019, 2018 and 2017, respectively, were not included in computing diluted earnings per share because the effect
would have been antidilutive. The dilutive impact of the remaining awards outstanding in each year were included
in the effect of dilutive securities.
136
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 23. Financial Results by Quarter (Unaudited)
Fiscal 2019
Net sales
Cost of goods sold
(Gain) loss on disposal of assets
Multiemployer pension withdrawal income
Land and Development impairments
Restructuring and other costs
(Loss) gain on extinguishment of debt
Income tax expense
Consolidated net income
Net income attributable to common stockholders
Basic earnings per share attributable to common
stockholders
Diluted earnings per share attributable to common
stockholders
Fiscal 2018
Net sales
Cost of goods sold
Multiemployer pension withdrawal expense
Land and Development impairments
Restructuring and other costs
(Loss) gain on extinguishment of debt
Income tax benefit (expense)
Consolidated net income
Net income attributable to common stockholders
Basic earnings per share attributable to common
stockholders
Diluted earnings per share attributable to common
stockholders
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(In millions, except per share data)
4,690.0 $
3,701.1 $
6.5 $
(1.7) $
— $
17.9 $
(3.2) $
(77.6) $
253.8 $
252.6 $
4,620.0 $
3,720.4 $
— $
— $
13.0 $
34.8 $
0.4 $
(47.2) $
161.9 $
160.4 $
4,327.4 $
3,545.6 $
(43.8) $
— $
— $
54.4 $
(1.9) $
(62.7) $
139.8 $
139.1 $
4,651.6
3,572.9
(3.9)
(4.6)
—
66.6
(0.4)
(89.3)
312.4
310.8
0.55 $
0.63 $
0.98 $
1.21
0.54 $
0.62 $
0.98 $
1.20
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(In millions, except per share data)
4,137.5 $
3,270.4 $
4.2 $
1.7 $
17.1 $
0.9 $
(84.5) $
271.3 $
268.2 $
4,017.0 $
3,227.6 $
— $
— $
31.7 $
0.1 $
(18.8) $
224.5 $
223.2 $
3,894.0 $
3,120.5 $
180.0 $
27.6 $
16.3 $
(1.0) $
1,073.2 $
1,133.5 $
1,135.1 $
4,236.6
3,304.6
—
2.6
40.3
(0.1)
(95.4)
280.0
279.6
4.45 $
0.87 $
1.05 $
1.10
4.38 $
0.86 $
1.03 $
1.08
We computed the interim earnings per common and common equivalent share amounts as if each quarter was
a discrete period. As a result, the sum of the basic and diluted earnings per share by quarter will not necessarily
total the annual basic and diluted earnings per share.
Consolidated net income in the first quarter of fiscal 2019 financial results by quarter (unaudited) table was
decreased by $39.8 million of direct expenses from Hurricane Michael (net of $20.0 million of insurance proceeds)
and an estimated $31.4 million of lost production and sales. Additionally, consolidated net income in the first
quarter was decreased by $24.7 million of expense for inventory stepped-up in purchase accounting related to the
KapStone Acquisition and increased by a $48.5 million gain on sale of our Atlanta beverage facility. Basic and
diluted earnings per share attributable to common stockholders were decreased by approximately $0.14 and $0.14
per share, respectively for these items.
Consolidated net income in the fourth quarter of fiscal 2019 financial results by quarter (unaudited) table was
increased by $63.4 million related to Hurricane Michael as $70.0 million of insurance proceeds were partially offset
by $6.6 million of direct expenses. Basic and diluted earnings per share attributable to common stockholders were
increased by approximately $0.19 and $0.18 per share, respectively for these items.
137
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Consolidated net income in the first quarter of fiscal 2018 financial results by quarter (unaudited) table was
decreased as the result of recording an estimated MEPP withdrawal of $180.0 million, or $179.1 million net of
noncontrolling interest, to withdraw from a MEPP. See “Note 5. Retirement Plans — Multiemployer Plans”.
Additionally, consolidated net income in the first quarter of fiscal 2018 financial results by quarter (unaudited) table
was decreased due to a $27.6 million, or $25.6 million net of noncontrolling interest, pre-tax non-cash impairment
of certain mineral rights and real estate. Further, consolidated net income in the first quarter of fiscal 2018 financial
results by quarter (unaudited) table was increased by $1,086.9 million for the provisional amount recorded for the
remeasurement of our deferred tax balances in connection with the Tax Act. See “Note 6. Income Taxes”. Basic
and diluted earnings per share attributable to common stockholders were increased by approximately $3.67 and
$3.61 per share, respectively for these items.
Consolidated net income in the second quarter of fiscal 2018 financial results by quarter (unaudited) table
increased by $36.3 million related to an adjustment to the provisional amount previously recorded for the
remeasurement of our deferred tax balances in connection with the Tax Act. Basic and diluted earnings per share
attributable to common stockholders were each increased by $0.14 per share.
138
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
WestRock Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of WestRock Company (the Company) as of
September 30, 2019 and 2018, the related consolidated statements of income, comprehensive income, equity and
cash flows for each of the three years in the period ended September 30, 2019, and the related notes (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at September 30, 2019 and 2018, and
the results of its operations and its cash flows for each of the three years in the period ended September 30, 2019,
in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2019, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework), and our report dated November 15, 2019
expressed an unqualified opinion thereon.
Adoption of New Accounting Standards
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting
for revenue from contracts with customers and certain fulfillment costs in 2019 due to the adoption of ASC 606,
Revenue from Contracts with Customers.
As discussed in Note 1 to the consolidated financial statements, the Company changed its classification of cash
receipts on the deferred purchase price receivable on asset-backed securitization transactions in 2019 due to the
adoption of ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash
Payments.
As discussed in Note 1 to the consolidated financial statements, the Company changed its presentation of non-
service components of pension and other postretirement income (expense) in 2019 due to the adoption of ASU No.
2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Cost and
Net Periodic Postretirement Benefit Cost.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
139
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.
Description of
the Matter
Accounting for the Acquisition of KapStone Paper and Packaging Corporation
During 2019, the Company completed its acquisition of KapStone Paper and Packaging
Corporation (KapStone) for net consideration of $4.9 billion including debt assumed (the
“Transaction”), as disclosed in Note 3 to the consolidated financial statements. The Transaction is
accounted for as a business combination and the Company preliminarily allocated $1,303.0 million
of the purchase price to the fair value of the acquired customer relationship intangible assets. The
Company is in the process of analyzing the estimated values of all assets acquired and liabilities
assumed including, among other things, finalizing third-party valuations of certain tangible and
intangible assets, as well as the fair value of certain contracts and the determination of certain tax
balances; therefore, the allocation of the purchase price is preliminary and subject to revision as of
September 30, 2019.
Auditing management's preliminary allocation of purchase price for its acquisition of KapStone
involved especially subjective and complex judgements due to the significant estimation required
in determining the fair value of customer relationship intangible assets. The significant estimation
was primarily due to the complexity of the valuation models used to measure that fair value as well
as the sensitivity of the respective fair values to the underlying significant assumptions. The
significant assumptions used to estimate the fair value of the customer relationship intangible
assets and subsequent amortization expense included discount rates, customer attrition rates and
economic lives. These significant assumptions are forward-looking and could be affected by future
economic and market conditions.
How We
Addressed the
Matter in Our
Audit
We tested the design and operating effectiveness of the Company's controls related to the
accounting for the KapStone acquisition. For example, we tested controls over the recognition and
measurement of customer relationship intangible assets in the acquisition, including the
Company’s controls over the valuation model, the mathematical accuracy of the valuation model
and development of underlying assumptions used to develop such fair value measurement
estimates.
To test the fair value of the Company's customer relationship intangible assets, our audit
procedures included, among others, evaluating the Company's valuation model, the method and
significant assumptions used and testing the completeness and accuracy of the underlying data
supporting the significant assumptions and estimates. We involved our valuation specialists to
assist with our evaluation of the valuation model and certain significant assumptions. For example,
we reconciled the discount rates to the projected internal rate of return for the Transaction and
compared the attrition rates to industry data. In addition, to evaluate the effect of changes in
assumptions, we performed sensitivity analysis of the fair value of customer relationship intangible
assets, and of amortization expense to the economic lives assigned to the customer relationship
intangible assets.
Test of Goodwill for Impairment
Description of
the Matter
At September 30, 2019, the Company’s goodwill is $7,285.6 million. As discussed in Note 1 of the
consolidated financial statements, goodwill is tested for impairment at least annually at the
reporting unit level. This requires management to estimate the fair value of the reporting units with
goodwill allocated to them.
Auditing management’s goodwill impairment tests involved especially subjective judgements due
to the significant estimation required in determining the fair value of the reporting units. In
particular, the estimates for the fair values of the Company’s reporting units are sensitive to
assumptions such as the discount rate and expected future net cash flows, including projected
operating results, capital expenditures and tax rates, which are affected by expectations about
140
future market or economic conditions.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company’s goodwill impairment review process. For example, we tested controls
over the estimation of the fair values of the reporting units, including the Company’s controls over
the valuation models, the mathematical accuracy of the valuation models and development of
underlying assumptions used to develop such fair values of the reporting units. We also tested
management’s review of the reconciliation of the aggregate estimated fair value of the reporting
units to the market capitalization of the Company.
To test the estimated fair values of the Company’s reporting units, our audit procedures included,
among others, assessing the valuation methodology and the underlying data used by the
Company in its analysis, including testing the significant assumptions discussed above. We
compared the significant assumptions used by management to current industry and economic
trends, changes to the Company’s business model and other relevant factors. We assessed the
historical accuracy of management’s assumptions of future expected net cash flows and
performed sensitivity analyses of significant assumptions to evaluate the changes in the fair
values of the reporting units that would result from changes in the assumptions. We involved
valuation specialists to assist in our evaluation of the valuation methodology and the significant
assumptions, including the discount rate used in determining the fair values of the reporting units.
We also tested the reconciliation of the aggregate estimated fair value of the reporting units to the
market capitalization of the Company.
Uncertain Tax Positions
Description of
the Matter
As discussed in Note 6 to the consolidated financial statements, the Company has unrecognized
income tax benefits of $224.3 million related to its uncertain tax positions at September 30, 2019.
The Company uses significant judgment in determining (1) whether a tax position, based solely on
its technical merits, is more likely than not to be sustained upon examination, and (2) measuring
the tax benefit as the largest amount of benefit which is more likely than not to be realized upon
ultimate settlement. The Company does not record any benefit for the tax positions that do not
meet the more-likely-than-not initial recognition threshold.
Auditing management’s analysis of its uncertain tax positions and resulting unrecognized income
tax benefits involved especially subjective and complex judgements because each tax position
carries unique facts and circumstances that require interpretation of laws, regulations and legal
rulings, and other factors.
How We
Addressed the
Matter in Our
Audit
We tested the Company’s controls that address the risks of material misstatement relating to
uncertain tax positions. For example, we tested controls over management’s identification of
uncertain tax positions and application of the two-step recognition and measurement principles,
including management’s review of the inputs and resulting calculations of unrecognized income
tax benefits.
To test the Company’s measurement and recording of its uncertain tax positions, our audit
procedures included, among others, inspecting the Company’s analysis and related tax opinions
to evaluate the assumptions the Company used to develop its uncertain tax positions and related
unrecognized income tax benefit amounts by jurisdiction. We also tested the completeness and
accuracy of the underlying data used by the Company to calculate its uncertain tax positions. For
example, we compared the unrecognized income tax benefits to similar positions in prior periods
and assessed management’s consideration of current tax controversy and litigation trends in
similar positions challenged by tax authorities. In addition, we involved tax subject matter
resources to evaluate the application of relevant tax laws in the Company’s recognition
determination. We also evaluated the Company’s income tax disclosures in relation to these
matters included in Note 6 to the consolidated financial statements.
141
/s/ Ernst & Young LLP
We have served as the Company’s or its predecessor’s auditor since at least 1975, but we are unable to determine
the specific year.
Atlanta, Georgia
November 15, 2019
142
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
WestRock Company
Opinion on Internal Control over Financial Reporting
We have audited WestRock Company’s internal control over financial reporting as of September 30, 2019, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, WestRock
Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of
September 30, 2019, based on the COSO criteria.
As indicated in the accompanying Management’s Annual Report On Internal Control Over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did
not include the internal controls of KapStone Paper and Packaging Corporation, which is included in the 2019
consolidated financial statements of the Company and constituted $5.7 billion of total assets as of September 30,
2019 and $2.8 billion of total revenues for the year then ended. Our audit of internal control over financial reporting
of the Company also did not include an evaluation of the internal control over financial reporting of KapStone Paper
and Packaging Corporation.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of WestRock Company as of September 30, 2019 and
2018, and the related consolidated statements of income, comprehensive income, equity and cash flows for each
of the three years in the period ended September 30, 2019, and the related notes and our report dated
November 15, 2019, expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report On Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitation of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
143
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Atlanta, Georgia
November 15, 2019
144
WESTROCK COMPANY
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management’s Responsibility for the Financial Statements
The management of WestRock Company is responsible for the preparation and integrity of the consolidated
financial statements appearing in our Annual Report on Form 10-K. The financial statements were prepared in
conformity with GAAP appropriate in the circumstances and, accordingly, include certain amounts based on our
best judgments and estimates. Financial information in this Annual Report on Form 10-K is consistent with that in
the financial statements.
Internal Control Over Financial Reporting
Management of our company is responsible for establishing and maintaining adequate internal control over
financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. Our internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of the consolidated financial statements. Our internal control over financial reporting is supported
by a program of internal audits and appropriate reviews by management, written policies and guidelines, careful
selection and training of qualified personnel and a written code of conduct adopted by our board of directors that is
applicable to all officers and employees of our Company and subsidiaries, as well as a code of conduct that is
applicable to all of our directors.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements and even when determined to be effective, can only provide reasonable assurance with respect to
financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of September 30,
2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 framework).
The scope of our efforts to comply with Section 404 of the Sarbanes-Oxley Act with respect to fiscal 2019 included
all of our operations other than those we acquired in fiscal 2019 related to the KapStone Acquisition. In accordance
with the SEC’s published guidance, because we acquired these operations during the fiscal year, we excluded
these operations from our efforts to comply with Section 404 with respect to fiscal 2019. Total assets as of
September 30, 2019 and total revenues for the year ending September 30, 2019 for the operations acquired in the
KapStone Acquisitions were $5.7 billion and $2.8 billion, respectively. The SEC’s published guidance specifies that
the period in which management may omit an assessment of an acquired business’s internal control over financial
reporting from its assessment of the Company’s internal control may not extend beyond one year from the date of
acquisition. Based on our assessment, which as discussed herein excluded the KapStone operations,
management believes that we maintained effective internal control over financial reporting as of September 30,
2019. Our independent auditors, Ernst & Young LLP, an independent registered public accounting firm, are
appointed by the Audit Committee of our board of directors. Ernst & Young LLP has audited and reported on the
consolidated financial statements of WestRock Company, and has issued an attestation report on the
effectiveness of our internal control over financial reporting. The report of the independent registered public
accounting firm is contained in this Annual Report.
Audit Committee Responsibility
The Audit Committee of our board of directors, composed solely of directors who are independent in
accordance with the requirements of the NYSE listing standards, the Exchange Act and our Corporate Governance
Guidelines, meets with the independent auditors, management and internal auditors periodically to discuss internal
control over financial reporting and auditing and financial reporting matters. The Audit Committee reviews with the
independent auditors the scope and results of the audit effort. The Audit Committee also meets periodically with
the independent auditors and the chief internal auditor without management present to ensure that the
independent auditors and the chief internal auditor have free access to the Audit Committee. Our Audit
Committee’s Report will be contained in our definitive proxy statement issued in connection with our 2020 annual
meeting of stockholders and is incorporated herein by reference.
145
November 15, 2019
STEVEN C. VOORHEES,
Chief Executive Officer and President
WARD H. DICKSON,
Executive Vice President and Chief Financial Officer
146
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no changes in or disagreements with accountants on accounting and financial disclosure.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and other procedures that are designed with the objective of ensuring the
following:
•
•
that information required to be disclosed by us in the reports that we file or submit under the Exchange
Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s
rules and forms; and
that information required to be disclosed by us in the reports that we file under the Exchange Act is
accumulated and communicated to our management, including our CEO and our Chief Financial
Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure.
We have performed an evaluation of the effectiveness of the design and operation of our disclosure controls
and procedures as of September 30, 2019, under the supervision and with the participation of our management,
including our CEO and CFO. Based on that evaluation, our CEO and CFO have concluded that our disclosure
controls and procedures were effective as of September 30, 2019, to provide reasonable assurance that we
record, process, summarize and report the information we must disclose in reports that we file or submit under the
Exchange Act within the time periods specified in the SEC's rules and forms and to allow timely decisions
regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognized that any controls
and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving
the desired control objectives, as ours are designed to do. Management also noted that the design of any system
of controls is also based in part upon certain assumptions about the likelihood of future events, and that there can
be no assurance that any such design will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote. Management necessarily was required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures.
Internal Control Over Financial Reporting
The report called for by Item 308(a) of Regulation S-K is incorporated herein by reference to Management’s
Annual Report on Internal Control over Financial Reporting of WestRock Company, included in Part II, Item 8 of
this report.
The attestation report called for by Item 308(b) of Regulation S-K is incorporated herein by reference to the
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting, included in
Part II, Item 8 of this report.
Management has evaluated, with the participation of our CEO and CFO, changes in our internal controls over
financial reporting during the quarter ended September 30, 2019. In connection with that evaluation, we have
determined that there has been no change in our internal control over financial reporting identified in connection
with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the
fourth quarter that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting, except as described below. During fiscal 2019, we completed the KapStone Acquisition.
Subsequent to the KapStone Acquisition, we have begun integration and controls assessment activities. See
“Note 3. Acquisitions and Investment” of the Notes to Consolidated Financial Statements for more information.
KapStone represented approximately $2.8 billion of our net sales for the year ended September 30, 2019, and
approximately $5.7 billion of our total assets, at September 30, 2019. In accordance with the SEC’s published
guidance, because we acquired these operations during the current fiscal year, we have excluded these
147
operations from our efforts to comply with Section 404 of the Sarbanes-Oxley Act for fiscal 2019. SEC rules require
that we complete our assessment of the internal control over financial reporting of the acquisition within one year
after the date of the acquisition.
CEO and CFO Certifications
Our CEO and CFO have filed with the SEC the certifications required by Section 302 of the Sarbanes-Oxley
Act as Exhibits 31.1 and 31.2, respectively, to this Annual Report on Form 10-K. In addition, on February 12, 2019,
our CEO certified to the NYSE that he was not aware of any violation by the Company of the NYSE corporate
governance listing standards as in effect on February 12, 2019. The foregoing certification was unqualified.
Item 9B. OTHER INFORMATION
Not applicable.
148
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
EXECUTIVE OFFICERS
Identification of Executive Officers
The executive officers of the Company are as follows as of November 13, 2019:
Name
Steven C. Voorhees
Patrick E. Lindner
Jeffrey W. Chalovich
James B. Porter III
Marc P. Shore
Ward H. Dickson
Robert B. McIntosh
Vicki L. Lostetter
Kelly C. Janzen
Age
65
50
56
68
65
57
62
60
46
Position Held
Chief Executive Officer and President
Chief Innovation Officer and President Consumer Packaging
Chief Commercial Officer and President Corrugated Packaging
President, Business Development and Latin America
President, Multi Packaging Solutions
Executive Vice President and Chief Financial Officer
Executive Vice President, General Counsel and Secretary
Chief Human Resources Officer
Chief Accounting Officer
Steven C. Voorhees has served as WestRock’s chief executive officer and president since July 1, 2015. He
served as RockTenn’s chief executive officer from November 2013 through June 30, 2015, as RockTenn’s
president and chief operating officer from January 2013 through October 2013 and as RockTenn’s executive vice
president and chief financial officer, from September 2000 through January 2013. Mr. Voorhees also served as
RockTenn’s chief administrative officer from July 2008 through January 2013.
Patrick E. Lindner has served as WestRock’s president, consumer packaging since March 2019 and as chief
innovation officer since October 2019. He previously served as chief operating officer for W.L. Gore & Associates.
Prior to joining W.L. Gore & Associates, Mr. Lindner served in various leadership roles with E. I. Du Pont De
Nemours and Company, including as president – DuPont Performance Materials and president – DuPont
Performance Polymers.
Jeffrey W. Chalovich has served as WestRock’s president, corrugated packaging since September 2016 and
as chief commercial officer since February 2019. He previously served as WestRock’s executive vice president of
corrugated containers and commercial excellence. He served as Rock-Tenn’s senior vice president and general
manager of corrugated containers through June 30, 2015. Mr. Chalovich joined RockTenn in connection with its
acquisition of Southern Container Corp in 2008, where he served in a variety of sales and general management
roles.
James B. Porter III has served as WestRock’s president, business development and Latin America since
September 2016. He previously served as WestRock’s president, paper solutions since July 1, 2015. He served as
RockTenn’s president, paper solutions from April 2014 through June 30, 2015, as RockTenn’s president -
corrugated packaging from July 2012 to April 2014, as RockTenn’s president - corrugated packaging and recycling
from May 2011 to July 2012 and as executive vice president of RockTenn’s corrugated packaging business from
July 2008 until May 2011. Mr. Porter joined RockTenn in connection with its acquisition of Southern Container
Corp. in 2008. Prior to his appointment as executive vice president of RockTenn, Mr. Porter served as the
president and chief operating officer of Southern Container from 2004 and as the president of Solvay Paperboard,
a subsidiary of Southern Container, from 1997 through 2004.
Marc P. Shore has served as WestRock’s president, multi packaging solutions since June 2017. He had
previously served as chief executive officer of MPS and Shorewood Packaging. Mr. Shore has 40 years of
experience in the print-based specialty packaging industry. He founded MPS in 2005 with private equity
sponsorship and helped take the company public in 2015. During his time at Shorewood Packaging, he led the
company through a successful initial public offering and for 14 years as a public company before its sale to
International Paper in 2000. Mr. Shore continued as president of the business and as a corporate officer of
International Paper until 2004.
149
Ward H. Dickson has served as WestRock’s executive vice president and chief financial officer since July 1,
2015. He served as RockTenn’s executive vice president and chief financial officer from September 2013 through
June 30, 2015. From November 2011 until September 2013, he served as the senior vice president of finance for
the global sales and service organization of Cisco Systems, Inc., and, from July 2009 to November 2011, he
served as the vice president of finance for the global sales and service organization of Cisco. Mr. Dickson served
as the vice president of finance at Scientific Atlanta, Inc., a division of Cisco, from February 2006 until July 2009.
Prior to Cisco’s acquisition of Scientific Atlanta, Inc. in February 2006, Mr. Dickson had served as that company’s
vice president of worldwide financial operations since 2003.
Robert B. McIntosh has served as WestRock’s executive vice president, general counsel and secretary since
July 1, 2015. He served as RockTenn’s executive vice president, general counsel and secretary from January
2009 through June 30, 2015 and as RockTenn’s senior vice president, general counsel and secretary from
August 2000 until January 2009. Mr. McIntosh joined RockTenn in 1995 as vice president and general counsel.
Vicki L. Lostetter has served as WestRock’s chief human resources officer since February 2018. She
previously served as General Manager, Talent and Organization Capability and General Manager, Global Talent
Management with Microsoft Incorporated. Prior to joining Microsoft, Ms. Lostetter served in various leadership
roles within the human resources function with Coca-Cola Enterprises, Inc., The Coca-Cola Company and
Honeywell, Inc.
Kelly C. Janzen has served as WestRock’s chief accounting officer since November 2017. She previously had
served as the Company’s senior vice president – accounting since August 2017. Prior to joining the Company, she
served as vice president, controller and chief accounting officer for Baker Hughes Inc., vice president finance and
chief accounting officer for McDermott International Inc. and served in various leadership roles within the
Controllership function with General Electric.
All of our executive officers are elected annually by, and serve at the discretion of, the board of directors.
See Part I, Item 1 “Available Information” of this Form 10-K for information about our Code of Ethical Conduct
for our Chief Executive Officer and Senior Financial Officers, including that any amendments to, or waiver from,
any provision of such code required to be disclosed will be posted on our website. The remainder of the information
required by this item will be contained in our definitive proxy statement issued in connection with our 2020 annual
meeting of stockholders and is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in our definitive proxy statement issued in connection
with our 2020 annual meeting of stockholders and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this item will be contained in our definitive proxy statement issued in connection
with our 2020 annual meeting of stockholders and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item will be contained in our definitive proxy statement issued in connection
with our 2020 annual meeting of stockholders and is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item will be contained in our definitive proxy statement issued in connection
with our 2020 annual meeting of stockholders and is incorporated herein by reference.
150
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. Financial Statements.
PART IV
The following consolidated financial statements of our company and our consolidated subsidiaries and the
Report of the Independent Registered Public Accounting Firm are included in Part II, Item 8 of this report:
Consolidated Statements of Income for the years ended September 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income for the years ended September 2019, 2018 and
2017
Consolidated Balance Sheets as of September 30, 2019 and 2018
Consolidated Statements of Equity for the years ended September 30, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended September 30, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting
Management’s Annual Report on Internal Control Over Financial Reporting
2. Financial Statement Schedule of WestRock Company.
Page
Reference
55
56
57
58
60
62
139
143
145
All schedules are omitted because they are not applicable or not required because this information is provided
in the financial statements.
3. Exhibits.
See separate Exhibit Index attached hereto and incorporated herein.
(b) See Item 15(a)(3) and separate Exhibit Index attached hereto and incorporated herein.
(c) Not applicable.
Item 16.
FORM 10-K SUMMARY
None.
151
Exhibit
Number
2.1
2.2(a)
2.2(b)
2.3
2.4
2.5
2.6
3.1
3.2
3.3
4.1(a)
4.1(b)
4.1(c)
INDEX TO EXHIBITS
Description of Exhibits
Agreement and Plan of Merger, dated as of January 23, 2011, by and among, Rock-Tenn Company,
Sam Acquisition, LLC and Smurfit-Stone Container Corporation (incorporated by reference to Exhibit
2.1 of RockTenn’s Current Report on Form 8-K, filed on January 24, 2011).
Second Amended and Restated Business Combination Agreement, dated as of April 17, 2015,
by and among WestRock Company, MeadWestvaco Corporation, Rock-Tenn Company, Milan
Merger Sub, LLC and Rome Merger Sub, Inc. (incorporated by reference to Annex A of WestRock’s
Registration Statement on Form S-4 initially filed with the SEC on March 10, 2015 and as amended
on April 20, 2015, May 6, 2015 and May 18, 2015, File No. 333-202643).†
First Amendment to the Second Amended and Restated Business Combination Agreement, dated
as of May 5, 2015, by and among WestRock Company, MeadWestvaco Corporation, Rock-Tenn
Company, Milan Merger Sub, LLC and Rome Merger Sub, Inc. (incorporated by reference to Exhibit
2.2 of WestRock’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015).†
Separation and Distribution Agreement, dated May 14, 2016, between WestRock Company and
Ingevity Corporation (incorporated by reference to Exhibit 2.1 of WestRock’s Current Report on
Form 8-K filed on May 19, 2016).
Purchase Agreement, dated January 23, 2017, by and among Silgan Holdings LLC, Silgan White
Cap Holdings Spain, S.L., Silgan Holdings B.V., Silgan Holdings Inc., WestRock MWV, LLC and
WestRock Company (incorporated by reference to Exhibit 2.4 of WestRock’s Current Report on
Form 8-K filed on January 24, 2017).†
Agreement and Plan of Merger, dated January 23, 2017, among WestRock Company, WRK Merger
Sub Limited and Multi Packaging Solutions International Limited (incorporated by reference to
Exhibit 2.5 of WestRock’s Current Report on Form 8-K filed on January 24, 2017).
Agreement and Plan of Merger, dated January 28, 2018, among KapStone Paper and Packaging
Corporation, WestRock Company, Whiskey Holdco, Inc., Whiskey Merger Sub, Inc. and Kola Merger
Sub, Inc. (incorporated by reference to Exhibit 2.1 of WestRock’s Current Report on Form 8-K filed
on January 29, 2018).
Amended and Restated Certificate of Incorporation of WestRock Company, effective as of
November 2, 2018 (incorporated by reference to Exhibit 3.1 of WestRock’s Current Report on Form
8-K filed on November 5, 2018).
Certificate of Correction to the Amended and Restated Certificate of Incorporation of WestRock
Company dated November 13, 2018 (incorporated by reference to Exhibit 3.2 of WestRock’s Annual
Report on Form 10-K filed on November 16, 2018).
Amended and Restated Bylaws of WestRock Company, effective as of November 2, 2018
(incorporated by reference to Exhibit 3.2 of WestRock’s Current Report on Form 8-K filed on
November 5, 2018).
Form of Indenture, dated as of July 15, 1982, between The Mead Corporation and Deutsche Bank
Trust Company Americas (formerly Bankers Trust Company), as Trustee (incorporated by reference
to Exhibit 4.viv of MWV’s Annual Report on Form 10-K for the Transition Period ended December 31,
2001).
First Supplemental Indenture, dated as of March 1, 1987, to the Indenture dated as of July 15, 1982,
between The Mead Corporation and Deutsche Bank Trust Company Americas (formerly Bankers
Trust Company), as Trustee (incorporated by reference to Exhibit 4.viv of MWV’s Annual Report on
Form 10-K for the Transition Period ended December 31, 2001).
Second Supplemental Indenture, dated as of October 15, 1989, to the Indenture dated as of July 15,
1982, between The Mead Corporation and Deutsche Bank Trust Company Americas (formerly
Bankers Trust Company), as Trustee (incorporated by reference to Exhibit 4.viv of MWV’s Annual
Report on Form 10-K for the Transition Period ended December 31, 2001).
152
4.1(d)
4.1(e)
4.1(f)
4.1(g)
4.1(h)
4.1(i)
P 4.2(a)
4.2(b)
4.2(c)
4.2(d)
4.2(e)
4.3(a)
4.3(b)
Third Supplemental Indenture, dated as of November 15, 1991, to the Indenture dated as of July 15,
1982, between The Mead Corporation and Deutsche Bank Trust Company Americas (formerly
Bankers Trust Company), as Trustee (incorporated by reference to Exhibit 4.viv of MWV’s Annual
Report on Form 10-K for the Transition Period ended December 31, 2001).
Fourth Supplemental Indenture, dated as of January 31, 2002, to the Indenture dated as of July 15,
1982, between The Mead Corporation, WestRock MWV, LLC (formerly MeadWestvaco
Corporation), Westvaco Corporation and Deutsche Bank Trust Company Americas (formerly
Bankers Trust Company), as Trustee (incorporated by reference to Exhibit 4.2 of MWV’s Current
Report on Form 8-K filed on February 1, 2002).
Fifth Supplemental Indenture, dated as of December 31, 2002, to the Indenture dated as of July 15,
1982, between MW Custom Papers, Inc. and Deutsche Bank Trust Company Americas, as Trustee
(incorporated by reference to Exhibit 4.2 of MWV’s Current Report on Form 8-K filed on January 7,
2003).
Sixth Supplemental Indenture, dated as of December 31, 2002, to the Indenture dated as of July 15,
1982, between WestRock MWV, LLC (formerly MeadWestvaco Corporation) and Deutsche Bank
Trust Company Americas, as Trustee (incorporated by reference to Exhibit 4.3 of MWV’s Current
Report on Form 8-K filed on January 7, 2003).
Seventh Supplemental Indenture, dated as of July 1, 2015, to the Indenture dated as of July 15,
1982, between WestRock MWV, LLC (formerly MeadWestvaco Corporation) and Deutsche Bank
Trust Company Americas, as Trustee (incorporated by reference to Exhibit 4.3 of WestRock’s
Current Report on Form 8-K filed on July 2, 2015).
Eighth Supplemental Indenture, dated as of November 2, 2018, to the Indenture dated as of July 15,
1982, between MWV and Deutsche Bank Trust Company Americas, as Trustee (incorporated by
reference to Exhibit 4.3 of WestRock’s Current Report on Form 8-K filed on November 5, 2018).
Form of Indenture, dated as of March 1, 1983, between Westvaco Corporation and The Bank of New
York (formerly Irving Trust Company), as Trustee (incorporated by reference to Exhibit 2 of
Westvaco Corporation’s Registration Statement on Form 8-A filed on January 24, 1984).
First Supplemental Indenture, dated as of January 31, 2002, to the Indenture dated as of March 1,
1983, by and among Westvaco Corporation, WestRock MWV, LLC (formerly MeadWestvaco
Corporation), The Mead Corporation and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 4.1 of MWV’s Current Report on Form 8-K filed on February 1, 2002).
Second Supplemental Indenture, dated as of December 31, 2002, to the Indenture dated as of
March 1, 1983, between WestRock MWV, LLC (formerly MeadWestvaco Corporation) and The Bank
of New York, as Trustee (incorporated by reference to Exhibit 4.1 of MWV’s Current Report on Form
8-K filed on January 7, 2003).
Third Supplemental Indenture, dated as of July 1, 2015, to the Indenture dated as of March 1, 1983,
between WestRock MWV, LLC (formerly MeadWestvaco Corporation) and The Bank of New York
Mellon, as Trustee (incorporated by reference to Exhibit 4.4 of WestRock’s Current Report on Form
8-K filed on July 2, 2015).
Fourth Supplemental Indenture, dated as of November 2, 2018, to the Indenture dated as of March
1, 1983, between MWV and The Bank of New York Mellon, as Trustee (incorporated by reference to
Exhibit 4.4 of WestRock’s Current Report on Form 8-K filed on November 5, 2018).
Indenture, dated as of February 1, 1993, between The Mead Corporation and The First National
Bank of Chicago, as Trustee (incorporated by reference to Exhibit 4.vv of MWV’s Annual Report on
Form 10-K for the Transition Period ended December 31, 2001).
First Supplemental Indenture, dated as of January 31, 2002, to the Indenture dated as of February 1,
1993, between The Mead Corporation, WestRock MWV, LLC (formerly MeadWestvaco
Corporation), Westvaco Corporation and Bank One Trust Company, NA, as Trustee (incorporated by
reference to Exhibit 4.3 of MWV’s Current Report on Form 8-K filed on February 1, 2002).
153
4.3(c)
4.3(d)
4.3(e)
4.3(f)
4.4(a)
4.4(b)
4.4(c)
4.5(a)
4.5(b)
4.5(c)
4.5(d)
4.5(e)
4.6(a)
Second Supplemental Indenture, dated as of December 31, 2002, to the Indenture dated as of
February 1, 1993, between MW Custom Papers, Inc. and Bank One Trust Company, NA, as Trustee
(incorporated by reference to Exhibit 4.4 of MWV’s Current Report on Form 8-K filed on January 7,
2003).
Third Supplemental Indenture, dated as of December 31, 2002, to the Indenture dated as of
February 1, 1993, between WestRock MWV, LLC (formerly MeadWestvaco Corporation) and Bank
One Trust Company, NA, as Trustee (incorporated by reference to Exhibit 4.5 of MWV’s Current
Report on Form 8-K filed on January 7, 2003).
Fourth Supplemental Indenture, dated as of July 1, 2015, to the Indenture dated as of February 1,
1993, between WestRock MWV, LLC (formerly MeadWestvaco Corporation) and The Bank of New
York Mellon, as Trustee (incorporated by reference to Exhibit 4.5 of WestRock’s Current Report on
Form 8-K filed on July 2, 2015).
Fifth Supplemental Indenture, dated as of November 2, 2018, to the Indenture dated as of February
1, 1993, between MWV and The Bank of New York Mellon, as Trustee (incorporated by reference to
Exhibit 4.5 of WestRock’s Current Report on Form 8-K filed on November 5, 2018).
Indenture, dated as of April 2, 2002, by and among WestRock MWV, LLC (formerly MeadWestvaco
Corporation), Westvaco Corporation, The Mead Corporation and The Bank of New York, as Trustee
(incorporated by reference to Exhibit 4(a) of MWV’s Current Report on Form 8-K filed on April 2,
2002).
First Supplemental Indenture, dated as of July 1, 2015, to the Indenture dated as of April 2, 2002,
between WestRock MWV, LLC (formerly MeadWestvaco Corporation) and The Bank of New York
Mellon, as Trustee (incorporated by reference to Exhibit 4.6 of WestRock’s Current Report on Form
8-K filed on July 2, 2015).
Second Supplemental Indenture, dated as of November 2, 2018, to the Indenture dated as of April 2,
2002, between MWV and The Bank of New York Mellon, as Trustee (incorporated by reference to
Exhibit 4.6 of WestRock’s Current Report on Form 8-K filed on November 5, 2018).
Indenture, dated as of February 22, 2012, by and among Rock-Tenn Company, the Guarantors (as
defined therein) and HSBC Bank USA, National Association, as Trustee (incorporated by reference
to Exhibit 4.18 of RockTenn’s Registration Statement on Form S-4 filed on February 8, 2013, File
No. 333-186552).
First Supplemental Indenture, dated as of November 7, 2013, to the Indenture dated as of February
22, 2012, by and among Rock-Tenn Company, the Guarantors (as defined therein) and HSBC Bank
USA, National Association, as Trustee (incorporated by reference to Exhibit 4.6(c) of WestRock’s
Annual Report on Form 10-K for the year ended September 30, 2015).
Second Supplemental Indenture, dated as of February 21, 2014, to the Indenture dated as of
February 22, 2012, by and among Rock-Tenn Company, the Guarantors (as defined therein) and
HSBC Bank USA, National Association, as Trustee (incorporated by reference to Exhibit 4.6(d) of
WestRock’s Annual Report on Form 10-K for the year ended September 30, 2015).
Third Supplemental Indenture, dated as of July 1, 2015, to the Indenture dated as of February 22,
2012, by and among Rock-Tenn Company, the Guarantors (as defined therein) and HSBC Bank
USA, National Association, as Trustee (incorporated by reference to Exhibit 4.1 of WestRock’s
Current Report on Form 8-K filed on July 2, 2015).
Fourth Supplemental Indenture, dated as of November 2, 2018, to the Indenture dated as of
February 22, 2012, by and among RKT, the guarantors party thereto and HSBC Bank USA, National
Association, as Trustee (incorporated by reference to Exhibit 4.1 of WestRock’s Current Report on
Form 8-K filed on November 5, 2018).
Indenture, dated as of September 11, 2012, by and among Rock-Tenn Company, the Guarantors (as
defined therein) and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated
by reference to Exhibit 4.1 of RockTenn’s Current Report on Form 8-K filed on October 2, 2012).
154
4.6(b)
4.6(c)
4.6(d)
4.6(e)
4.7(a)
4.7(b)
4.7(c)
4.7(d)
4.8(a)
4.8(b)
4.8(c)
4.9
*10.1(a)
*10.1(b)
First Supplemental Indenture, dated as of November 7, 2013, to the Indenture dated as of
September 11, 2012, by and among Rock-Tenn Company, the Guarantors (as defined therein) and
The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit
4.7(c) of WestRock’s Annual Report on Form 10-K for the year ended September 30, 2015).
Second Supplemental Indenture, dated as of February 21, 2014, to the Indenture dated as of
September 11, 2012, by and among Rock-Tenn Company, the Guarantors (as defined therein) and
The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit
4.7(d) of WestRock’s Annual Report on Form 10-K for the year ended September 30, 2015).
Third Supplemental Indenture, dated as of July 1, 2015, to the Indenture dated as of September 11,
2012, by and among Rock-Tenn Company, the Guarantors (as defined therein) and The Bank of
New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 of
WestRock’s Current Report on Form 8-K filed on July 2, 2015).
Fourth Supplemental Indenture, dated as of November 2, 2018, to the Indenture dated as of
September 11, 2012, by and among RKT, the guarantors party thereto and The Bank of New York
Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 of WestRock’s
Current Report on Form 8-K filed on November 5, 2018).
Indenture, dated August 24, 2017, by and among WestRock Company, WestRock MWV LLC,
WestRock RKT Company and The Bank of New York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.1 of WestRock’s Current Report on Form 8-K filed on August
24, 2017).
First Supplemental Indenture, dated August 24, 2017, by and among WestRock Company,
WestRock MWV LLC, WestRock RKT Company and The Bank of New York Mellon Trust Company,
N.A., as trustee (incorporated by reference to Exhibit 4.2 of WestRock’s Current Report on Form 8-K
filed on August 24, 2017).
Second Supplemental Indenture, dated as of March 6, 2018, by and among WestRock Company,
WestRock MWV LLC, WestRock RKT Company and The Bank of New York Mellon Trust Company,
N.A., as trustee (incorporated by reference to Exhibit 4.1 of WestRock’s Current Report on Form 8-K
filed on March 6, 2018).
Third Supplemental Indenture, dated as of November 2, 2018, to the Indenture dated as of August
24, 2017, among WRKCo, RKT, MWV and The Bank of New York Mellon, as Trustee (incorporated
by reference to Exhibit 4.7 of WestRock’s Current Report on Form 8-K filed on November 5, 2018).
Indenture, dated as of December 3, 2018, by and among WRKCo Inc., WestRock Company,
WestRock MWV, LLC, WestRock RKT, LLC and The Bank of New York Mellon Trust Company,
N.A., as trustee (incorporated by reference to Exhibit 4.1 of WestRock’s Current Report on Form 8-K
filed on December 3, 2018).
First Supplemental Indenture, dated as of December 3, 2018, by and among WRKCo Inc.,
WestRock Company, WestRock MWV, LLC, WestRock RKT, LLC and The Bank of New York Mellon
Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 of WestRock’s Current
Report on Form 8-K filed on December 3, 2018).
Second Supplemental Indenture, dated as of May 20, 2019, by and among WRKCo Inc., WestRock
Company, WestRock MWV, LLC, WestRock RKT, LLC and The Bank of New York Mellon Trust
Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 of WestRock Company’s
Current Report on Form 8-K filed on May 20, 2019).
Description of the Registrant’s Common Stock Registered Pursuant to Section 12 of the Securities
Exchange Act of 1934.
The Mead Corporation 1996 Stock Option Plan, as amended through June 24, 1999 (incorporated
by reference to Exhibit 10.3 of The Mead Corporation’s Quarterly Report on Form 10-Q for the
quarter ended July 4, 1999).
The Mead Corporation 1996 Stock Option Plan, as amended February 22, 2001 (incorporated by
reference to Appendix 2 of The Mead Corporation’s Definitive Proxy Statement for the 2001 Annual
Meeting of Shareholders filed with the SEC on March 9, 2001).
155
*10.1(c)
*10.1(d)
*10.2(a)
*10.2(b)
*10.3
*10.4(a)
*10.4(b)
*10.4(c)
*10.4(d)
*10.4(e)
*10.4(f)
*10.5
*10.6(a)
*10.6(b)
*10.6(c)
*10.7(a)
Amendment to The Mead Corporation 1996 Stock Option Plan, effective April 23, 2002 (incorporated
by reference to Exhibit 10.3 of MWV’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2002).
Amendment to The Mead Corporation 1996 Stock Option Plan, effective January 23, 2007
(incorporated by reference to Exhibit 10.4 of MWV’s Annual Report on Form 10-K for the year ended
December 31, 2007).
WestRock Company Second Amended and Restated Annual Executive Bonus Plan (incorporated by
reference to pages A-1 to A-3 of WestRock’s Definitive Proxy Statement for the 2018 Annual
Meeting of Shareholders filed with the SEC on December 19, 2017).
WestRock Company Third Amended and Restated Annual Executive Bonus Plan, dated January 31,
2019 (incorporated by reference to Exhibit 10.1 of WestRock’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2019).
Rock-Tenn Company Supplemental Retirement Savings Plan, effective as of May 15, 2003
(incorporated by reference to Exhibit 4.1 of RockTenn’s Registration Statement on Form S-8 filed on
April 30, 2003, File No. 333-104870).
Rock-Tenn Company 2004 Incentive Stock Plan (incorporated by reference to Exhibit 10.1 of
RockTenn’s Current Report on Form 8-K filed on February 3, 2005).
Amendment Number 1 to Rock-Tenn Company 2004 Incentive Stock Plan (incorporated by
reference to Exhibit 10.1 of RockTenn’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2007).
Amendment Number 2 to Rock-Tenn Company 2004 Incentive Stock Plan (incorporated by
reference to Exhibit 10.5 of RockTenn’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2008).
Amendment Number 3 to Rock-Tenn Company 2004 Incentive Stock Plan (incorporated by
reference to Exhibit 10.2 of RockTenn’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2009).
Amendment Number 4 to Rock-Tenn Company 2004 Incentive Stock Plan (incorporated by
reference to Exhibit 10.1 of RockTenn’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2011).
Amendment Number 5 to Rock-Tenn Company 2004 Incentive Stock Plan (incorporated by
reference to Exhibit 10.2 of RockTenn’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2011).
MeadWestvaco Corporation 2005 Performance Incentive Plan effective April 22, 2005 and as
amended February 26, 2007, January 1, 2009, February 28, 2011 and February 25, 2013
(incorporated by reference to Exhibit 10.1 of MWV’s Current Report on Form 8-K filed on April 25,
2013).
Amended and Restated Rock-Tenn Company Supplemental Retirement Savings Plan, effective as
of January 1, 2006 (incorporated by reference to Exhibit 10.4 of RockTenn’s Quarterly Report on
Form 10-Q for the quarter ended December 31, 2005).
Second Amendment to the Rock-Tenn Company Supplemental Retirement Savings Plan, effective
as of November 16, 2007 (incorporated by reference to Exhibit 10.2 of RockTenn’s Quarterly Report
on Form 10-Q for the quarter ended December 31, 2007).
First Amendment to the Rock-Tenn Company Supplemental Retirement Savings Plan, effective as of
October 1, 2011 (incorporated by reference to Exhibit 10.1 of RockTenn’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2012).
MeadWestvaco Corporation Deferred Income Plan Restatement, effective January 1, 2007
(incorporated by reference to Exhibit 10.25 of MWV’s Annual Report on Form 10-K for the year
ended December 31, 2008).
156
*10.7(b)
*10.7(c)
*10.7(d)
*10.8
*10.9
*10.10
*10.11
*10.12
*10.13
*10.14
*10.15
*10.16
*10.17
*10.18
*10.19
*10.20(a)
*10.20(b)
10.21
First Amendment to the MeadWestvaco Corporation Deferred Income Plan (2007 Restatement)
effective September 1, 2013 (incorporated by reference to Exhibit 10.7(b) of WestRock’s Annual
Report on Form 10-K for the year ended September 30, 2015).
Second Amendment to the MeadWestvaco Corporation Deferred Income Plan (2007 Restatement)
effective January 1, 2015 (incorporated by reference to Exhibit 10.7(c) of WestRock’s Annual Report
on Form 10-K for the year ended September 30, 2015).
Third Amendment to the MeadWestvaco Corporation Deferred Income Plan (2007 Restatement)
effective July 1, 2015 (incorporated by reference to Exhibit 10.7(d) of WestRock’s Annual Report on
Form 10-K for the year ended September 30, 2015).
MeadWestvaco Corporation Executive Retirement Plan, as amended and restated effective January
1, 2009 except as otherwise provided (incorporated by reference to Exhibit 10.24 of MWV’s Annual
Report on Form 10-K for the year ended December 31, 2008).
MeadWestvaco Corporation Retirement Restoration Plan, effective January 1, 2009, except as
otherwise provided (incorporated by reference to Exhibit 10.26 of MWV’s Annual Report on Form 10-
K for the year ended December 31, 2008).
Stock Option Awards in 2009 - Terms and Conditions (incorporated by reference to Exhibit 10.3 of
MWV’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009).
Service Based Restricted Stock Unit Awards in 2009 - Terms and Conditions (incorporated by
reference to Exhibit 10.4 of MWV’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2009).
Rock-Tenn Company Supplemental Executive Retirement Plan Amended and Restated effective as
of October 27, 2011(incorporated by reference to Exhibit 10.2 of RockTenn’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2012).
Amended and Restated Rock-Tenn Company 2004 Incentive Stock Plan effective as of January 27,
2012 (incorporated by reference to Exhibit 10.1 of the RockTenn’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2012).
Stock Option Awards (for 2012) (incorporated by reference to Exhibit 10.43 of MWV’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2012).
Summary of MeadWestvaco Corporation 2013 Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.46 of MWV’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013).
Summary of MeadWestvaco Corporation 2015 Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.51 of MWV’s quarterly report on Form 10-Q for the period ended March 31, 2015).
Summary of MeadWestvaco Corporation 2015 Annual Incentive Plan (incorporated by reference to
Exhibit 10.50 to MWV’s quarterly report on Form 10-Q for the period ended March 31, 2015).
WestRock Company 2016 Deferred Compensation Plan for Non-Employee Directors (incorporated
by reference to Exhibit 10.30 of WestRock’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2016).
Employee Stock Purchase Plan, dated February 2, 2016 (incorporated by reference to Exhibit 10.1
of WestRock’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016).
WestRock Company 2016 Incentive Stock Plan (incorporated by reference to Exhibit 10.2 of
WestRock’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016).
WestRock Company Amended and Restated 2016 Incentive Stock Plan (incorporated by reference
to pages B-1 to B-14 of WestRock’s Definitive Proxy Statement for the 2018 Annual Meeting of
Shareholders filed with the SEC on December 19, 2017).
Master Purchase and Sale Agreement, dated October 28, 2013, by and among MeadWestvaco
Corporation, MWV Community Development and Land Management, LLC and MWV Community
Development, Inc., as sellers, and Plum Creek Timberlands, L.P., Plum Creek Marketing, Inc., Plum
Creek Land Company and Highland Mineral Resources, LLC, as purchasers, and Plum Creek
Timber Company, Inc. (incorporated by reference to Exhibit 2.1 of MWV’s Current Report on Form 8-
157
*10.22
*10.23
10.24(a)
10.24(b)
10.25(a)
10.25(b)
10.25(c)
10.26(a)
10.26(b)
K filed on October 29, 2013).
Summary of MeadWestvaco Corporation 2014 Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.51 of MWV’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014).
Amendments to Grants under the MeadWestvaco Corporation 2005 Performance Incentive Plan
Amended and Restated Effective February 25, 2013 (2005 Performance Incentive Plan), effective
January 27, 2014 (incorporated by reference to Exhibit 10.47 of MWV’s Annual Report on Form 10-K
for the year ended December 31, 2013).
Sixth Amended and Restated Receivables Sale Agreement, dated July 22, 2016, among WestRock
Company of Texas, WestRock Converting Company, WestRock Mill Company, LLC, WestRock -
Southern Container, LLC, WestRock California, Inc., WestRock Minnesota Corporation, WestRock
CP, LLC, WestRock - Solvay, LLC, WestRock - REX, LLC, WestRock - Graphics, Inc., WestRock
Commercial, LLC, WestRock Packaging, Inc., WestRock Slatersville LLC, WestRock Consumer
Packaging Group, LLC, WestRock Dispensing Systems, Inc., and WestRock Packaging Systems,
LLC (incorporated by reference to Exhibit 10.20 of WestRock’s Annual Report on Form 10-K for the
year ended September 30, 2016).
Amendment No. 1, dated as of May 2, 2019, to the Sixth Amended and Restated Receivables Sale
Agreement, among WestRock Company of Texas, WestRock Converting Company, WestRock Mill
Company, LLC, WestRock - Southern Container, LLC, WestRock California, Inc., WestRock
Minnesota Corporation, WestRock CP, LLC, WestRock - Solvay, LLC, WestRock - REX, LLC,
WestRock - Graphics, Inc., WestRock Commercial, LLC, WestRock Packaging, Inc., WestRock
Slatersville LLC, WestRock Consumer Packaging Group, LLC, WestRock Dispensing Systems, Inc.,
and WestRock Packaging Systems, LLC (incorporated by reference to Exhibit 10.2 of WestRock’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2019).
Seventh Amended and Restated Credit and Security Agreement, dated as of June 29, 2015 among
Rock-Tenn Financial, Inc., as Borrower, Rock-Tenn Converting Company, as Servicer, the Lenders
and Co-Agents
thereto, and Coöperatieve Centrale Raiffeisen-
Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as Administrative Agent and as
Funding Agent (incorporated by reference to Exhibit 10.1 of WestRock’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2015).
time party
from
time
to
Eighth Amended and Restated Credit and Security Agreement, dated July 22, 2016, among
WestRock Financial Inc., WestRock Converting Company, the lenders and co-agents from time to
time party thereto and Cooperatieve Rabobank, U.A. (incorporated by reference to Exhibit 10.24(b)
of WestRock’s Annual Report on Form 10-K for the year ended September 30, 2016).
Amendment No. 1, dated as of May 2, 2019, to the Eighth Amended and Restated Credit and
Security Agreement among WestRock Financial Inc., WestRock Converting Company, the lenders
and co-agents from time to time party thereto and Cooperatieve Rabobank, U.A (incorporated by
reference to Exhibit 10.3 of WestRock’s Quarterly Report on Form 10-Q for the quarter ended June
30, 2019).
Credit Agreement, dated as of July 1, 2015, among the Company, Rock-Tenn Company of Canada
Holdings Corp./Compagnie de Holdings RockTenn du Canada Corp., certain subsidiaries of the
Company from time to time party thereto as subsidiary borrowers, certain subsidiaries of the
Company from time to time party thereto as guarantors, the lenders party thereto and Wells Fargo
Bank, National Association, as administrative agent and multicurrency agent (incorporated by
reference to Exhibit 10.1 of WestRock’s Current Report on Form 8-K filed on July 2, 2015).
Amendment No. 1, dated July 1, 2015, among WestRock Company, WestRock Company of Canada
Holdings Corp./Compagnie de Holdings WestRock du Canada Corp., the other Credit Parties, the
Lenders thereto and Wells Fargo Bank, National Association, as administrative agent and
multicurrency agent for the Lenders to the Credit Agreement, dated July 1, 2015 (incorporated by
reference to Exhibit 10.27.1 of WestRock’s Current Report on Form 8-K filed on July 7, 2016).
10.26(c)
Amendment No. 2, dated June 30, 2017, to the Credit Agreement, dated July 1, 2015, among
WestRock Company, WestRock Company of Canada Holdings Corp./Compagnie de Holdings
WestRock du Canada Corp., the other Credit Parties, the Lenders thereto and Wells Fargo Bank,
National Association, as administrative agent and multicurrency agent for the Lenders (incorporated
158
10.26(d)
10.26(e)
10.27(a)
10.27(b)
10.27(c)
10.27(d)
10.28
10.29
10.30
10.31
@10.32
10.33
by reference to Exhibit 10.2 of WestRock’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2017).
Amendment No. 3, dated as of March 7, 2018, to the Credit Agreement, dated as of July 1, 2015,
among WestRock Company, WestRock Company of Canada Holdings Corp./Compagnie de
Holdings WestRock du Canada Corp., WestRock RKT Company, WestRock MWV, LLC, Wells
Fargo Bank, National Association, and the lenders party thereto (incorporated by reference to Exhibit
10.2 of WestRock’s Current Report on Form 8-K filed on March 9, 2018).
Joinder, dated as of November 2, 2018, to the Credit Agreement dated as of July 1, 2015, among the
Company, WRKCo, WestRock Company of Canada Holdings Corp./Compagnie de Holdings
WestRock du Canada Corp. and Wells Fargo Bank, National Association, as administrative agent
and multicurrency agent (incorporated by reference to Exhibit 10.3 of WestRock’s Current Report on
Form 8-K filed on November 5, 2018).
Credit Agreement, dated as of July 1, 2015, among RockTenn CP, LLC, Rock-Tenn Converting
Company and MeadWestvaco Virginia Corporation, as borrowers, as the guarantors from time to
time party thereto, the lenders from time to time party thereto and CoBank, ACB, as administrative
agent (incorporated by reference to Exhibit 10.2 of WestRock’s Current Report on Form 8-K filed on
July 2, 2015).
Amendment No. 1, dated as of July 1, 2016, to the Credit Agreement, dated as of July 1, 2015,
among WestRock Company, WestRock CP, LLC, WestRock Converting Company, WestRock
Virginia Corporation and CoBank, ACB, as administrative agent.
Amendment No. 2, dated as of March 7, 2018, to the Credit Agreement, dated as of July 1, 2015,
among WestRock Company, WestRock CP, LLC, WestRock Converting Company, WestRock
Virginia Corporation and CoBank, ACB, as administrative agent (incorporated by reference to Exhibit
10.4 of WestRock’s Current Report on Form 8-K filed on March 9, 2018).
Joinder, dated as of November 2, 2018, to the Credit Agreement dated as of July 1, 2015, by and
among the Company, WestRock CP, LLC, WestRock Converting Company, WestRock Virginia
Corporation and CoBank, ACB, as administrative agent (incorporated by reference to Exhibit 10.1 of
WestRock’s Current Report on Form 8-K filed on November 5, 2018).
Credit Agreement, dated as of September 27, 2019, among WestRock Southeast, LLC, as borrower,
the guarantors from time to time thereunder, the lenders party thereto and CoBank, ACB, as
administrative agent (incorporated by reference to Exhibit 10.1 of WestRock’s Current Report on
Form 8-K filed on September 27, 2019).
Fifth Amended and Restated Performance Undertaking, dated as of September 1, 2015, executed
by Westrock RKT Company, as successor-in-interest to Rock-Tenn Company, and Westrock
Company (incorporated by reference to Exhibit 10.29 of WestRock’s Annual Report on Form 10-K
for the year ended September 30, 2015).
Uncommitted and Revolving Credit Line Agreement, dated February 11, 2016, between The Bank of
Tokyo-Mitsubishi UFJ, Ltd. and WestRock Company (incorporated by reference to Exhibit 10.3 of
WestRock’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016).
Uncommitted Line of Credit, dated March 4, 2016, between Cooperatieve Rabobank U.A., New York
Branch and WestRock Company (incorporated by reference to Exhibit 10.4 of WestRock’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2016).
Commitment Agreement, dated September 8, 2016, among WestRock Company, Prudential
Insurance Company of America and State Street Bank and Trust Company (incorporated by
reference to Exhibit 10.44 of WestRock’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2016).
Credit Agreement, dated as of May 15, 2017, by and among WestRock Company, as Parent, MWV
Luxembourg S.À R.L. and WestRock Packaging Systems UK LTD., as Borrowers, the lenders party
thereto, Coöperatieve Rabobank U.A., New York Branch, as Administrative Agent, Coöperatieve
Rabobank U.A., New York Branch, as Joint Lead Arranger and Sole Bookrunner, and Sumitomo
Mitsui Banking Corporation, TD Bank, N.A., and HSBC Bank USA, National Association as Joint
Lead Arrangers and Co-Syndication Agents (incorporated by reference to Exhibit 10.1 of
159
10.34(a)
10.34(b)
10.34(c)
10.34(d)
10.34(e)
10.35(a)
10.35(b)
10.36(a)
WestRock’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017).
Credit Agreement, dated as of October 31, 2017, among WestRock Company, the subsidiaries of
the Company from time to time party thereto, as borrowers, the subsidiaries of the Company from
time to time party thereto, as guarantors, the lenders from time to time party thereto and Wells Fargo
Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.2 of
WestRock’s Current Report on Form 8-K filed on November 2, 2017).
Amendment No. 1, dated as of March 7, 2018, to the Credit Agreement, dated as of October 31,
2017, among WestRock Company, WestRock RKT Company, WestRock MWV, LLC, Wells Fargo
Bank, National Association, and the lenders party thereto Amendment (incorporated by reference to
Exhibit 10.3 of WestRock’s Current Report on Form 8-K filed on March 9, 2018).
Amendment No. 2, dated as of October 29, 2018, to the Credit Agreement, dated as of October 31,
2017, among WestRock Company, WestRock RKT Company, WestRock MWV, LLC, Wells Fargo
Bank, National Association, and the lenders party thereto (incorporated by reference to Exhibit 10.6
of WestRock’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2018).
Joinder, dated as of November 2, 2018, to the Credit Agreement dated as of October 31, 2017, by
and among the Company, WRKCo and Wells Fargo Bank, National Association, as administrative
agent (incorporated by reference to Exhibit 10.2 of WestRock’s Current Report on Form 8-K filed on
November 5, 2018).
Amendment No. 3, dated as of October 25, 2019, to the Credit Agreement, dated as of October 31,
2017, among WestRock Company, WestRock RKT Company, WestRock MWV, LLC, Wells Fargo
Bank, National Association, and the lenders party thereto.
Credit Agreement, dated as of March 7, 2018, among Whiskey Holdco, Inc., as borrower, WestRock
Company and its subsidiaries from time to time party thereto, as guarantors, the lenders from time to
time party thereto and Wells Fargo Bank, National Association, as administrative agent (incorporated
by reference to Exhibit 10.1 of WestRock’s Current Report on Form 8-K filed on March 9, 2018).
Amendment No. 1, dated as of February 26, 2019, to the Credit Agreement, dated as of March 7,
2018, among WRKCo Inc., the other credit parties from time to time party thereto, Wells Fargo Bank,
National Association and the lenders referred to therein (incorporated by reference to Exhibit 10.4 of
WestRock’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019).
Credit Agreement, dated as of April 27, 2018, among WestRock Company, as parent, WRK
Luxembourg S.à r.l., WRK International Holdings S.à r.l., Multi Packaging Solutions Limited and
WestRock Packaging Systems Germany GmbH, as borrowers, the lenders party thereto and
Coöperatieve Rabobank U.A., New York Branch, as administrative agent (incorporated by reference
to Exhibit 10.1 of WestRock’s Current Report on Form 8-K filed on April 30, 2018).
10.36(b)
Joinder, dated as of November 2, 2018, to the Credit Agreement dated as of April 27, 2018, by and
among the Company, WRKCo and Coöperatieve Rabobank U.A., New York Branch, as
administrative agent (incorporated by reference to Exhibit 10.4 of WestRock’s Current Report on
Form 8-K filed on November 5, 2018).
10.37
*10.38
*10.39(a)
*10.39(b)
Form of Dealer Agreement among WestRock Company, WRKCo Inc., WestRock RKT, LLC,
WestRock MWV, LLC and the Dealer party thereto (incorporated by reference to Exhibit 10.1 of
WestRock’s Current Report on Form 8-K filed on December 10, 2018).
Letter Agreement between MeadWestvaco Corporation, Rock-Tenn Company and John A. Luke, Jr.,
dated June 30, 2015 (incorporated by reference to Exhibit 10.25 of WestRock’s Annual Report on
Form 10-K for the year ended September 30, 2015).
Amended and Restated Employment Agreement, dated January 1, 2008, between MeadWestvaco
Corporation and Robert A. Feeser (incorporated by reference to Exhibit 99.1 of WestRock’s Current
Report on Form 8-K filed on December 16, 2016).
Letter Agreement, dated December 12, 2016, between WestRock Company and Robert A. Feeser
(incorporated by reference to Exhibit 99.2 of WestRock’s Current Report on Form 8-K filed on
December 16, 2016).
160
*10.40
*10.41
*10.42
Employment Agreement, dated July 31, 2007, between Southern Container Corp. and Jeffrey W.
Chalovich (incorporated by reference to Exhibit 99.3 of WestRock’s Current Report on Form 8-K filed
on December 16, 2016).
Employment Agreement, dated January 23, 2017, among Multi Packaging Solutions International
Limited, WestRock Company and Marc Shore (incorporated by reference to Exhibit 10.1 of Multi
Packaging Solutions’ Current Report on Form 8-K filed on January 24, 2017).
Employment Agreement by and among RockTenn-Southern Container, LLC (successor-in-interest
to Southern Container Corp.), Rock-Tenn Services Inc., and James B. Porter III, dated as of
December 22, 2014, and effective as of January 1, 2015 (incorporated by reference to Exhibit 10.1 of
RockTenn’s Quarterly Report on Form 10-Q for the quarter ending December 31, 2014).
*10.43
WestRock Company Executive Severance Plan, dated April 5, 2019 (incorporated by reference to
Exhibit 10.1 of WestRock’s Current Report on Form 8-K filed on April 9, 2019).
21
23
31.1
31.2
#32.1
Subsidiaries of the Registrant.
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
Certification Accompanying Periodic Report Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, executed by Steven C. Voorhees, Chief Executive Officer and President of WestRock
Company.
Certification Accompanying Periodic Report Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, executed by Ward H. Dickson, Executive Vice President and Chief Financial Officer of
WestRock Company.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, executed by Steven C. Voorhees, Chief Executive Officer and
President of WestRock Company, and by Ward H. Dickson, Executive Vice President and Chief
Financial Officer of WestRock Company.
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data
File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF
Inline XBRL Taxonomy Extension Definition Label Linkbase.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase.
104
Cover Page Interactive Data File – the cover page interactive data file does not appear in the
Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
(included in Exhibit 101).
* Management contract or compensatory plan or arrangement.
† Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. WestRock hereby undertakes
to furnish supplementally copies of any of the omitted schedules upon request by the SEC.
@ Confidential treatment has been requested for certain portions omitted from this exhibit pursuant to Rule
24b-2 under the Exchange Act. Confidential portions of this exhibit have been separately filed with the SEC.
P Paper filing.
#
In accordance with SEC Release No. 33-8238, Exhibit 32.1 is to be treated as “accompanying” this report
rather than “filed” as part of the report.
161
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 15, 2019
By:
/s/ STEVEN C. VOORHEES
Steven C. Voorhees
Chief Executive Officer and President
WESTROCK COMPANY
162
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature
Title
/s/ STEVEN C. VOORHEES Chief Executive Officer and President
(Principal Executive Officer), Director
Steven C. Voorhees
Date
November 15, 2019
/s/ WARD H. DICKSON Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Ward H. Dickson
November 15, 2019
/s/ KELLY C. JANZEN
Kelly C. Janzen
Chief Accounting Officer
(Principal Accounting Officer)
November 15, 2019
/s/ JOHN A. LUKE, JR.
John A. Luke, Jr.
Director, Non-Executive Chairman of the Board
November 15, 2019
November 15, 2019
November 15, 2019
November 15, 2019
November 15, 2019
November 15, 2019
November 15, 2019
November 15, 2019
November 15, 2019
November 15, 2019
November 15, 2019
November 15, 2019
/s/ COLLEEN F. ARNOLD Director
Colleen F. Arnold
/s/ TIMOTHY J. BERNLOHR Director
Timothy J. Bernlohr
/s/ J. POWELL BROWN Director
J. Powell Brown
/s/ MICHAEL E. CAMPBELL Director
Michael E. Campbell
/s/ TERRELL K. CREWS Director
Terrell K. Crews
/s/ RUSSELL M. CURREY Director
Russell M. Currey
/s/ GRACIA C. MARTORE Director
Gracia C. Martore
/s/ JAMES E. NEVELS
James E. Nevels
Director
/s/ TIMOTHY H. POWERS Director
Timothy H. Powers
/s/ BETTINA M. WHYTE Director
Bettina M. Whyte
/s/ ALAN D. WILSON
Alan D. Wilson
Director
163
(cid:3)
CERTIFICATION ACCOMPANYING PERIODIC REPORT
PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Steven C. Voorhees, Chief Executive Officer and President, certify that:
I have reviewed this Annual Report on Form 10-K of WestRock Company;
1.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: November 15, 2019
/s/ Steven C. Voorhees
Steven C. Voorhees
Chief Executive Officer and President
A signed original of this written statement required by Section 302, or other document authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form within the electronic
version of this written statement required by Section 302, has been provided to WestRock Company and
will be retained by WestRock Company and furnished to the Securities and Exchange Commission or its
staff upon request.
Exhibit 31.2
CERTIFICATION ACCOMPANYING PERIODIC REPORT
PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Ward H. Dickson, Executive Vice President and Chief Financial Officer, certify that:
I have reviewed this Annual Report on Form 10-K of WestRock Company;
1.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: November 15, 2019
/s/ Ward H. Dickson
Ward H. Dickson
Executive Vice President and Chief Financial Officer
A signed original of this written statement required by Section 302, or other document authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form within the electronic
version of this written statement required by Section 302, has been provided to WestRock Company and
will be retained by WestRock Company and furnished to the Securities and Exchange Commission or its
staff upon request.
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(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:11)(cid:26)(cid:26)(cid:27)(cid:17)(cid:25)(cid:12)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:11)(cid:26)(cid:28)(cid:25)(cid:17)(cid:26)(cid:12)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:19)(cid:23)(cid:22)(cid:17)(cid:27)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:23)(cid:25)(cid:21)(cid:17)(cid:22)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:21)(cid:21)(cid:20)(cid:17)(cid:23)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:19)(cid:22)(cid:20)(cid:17)(cid:19)
Adjusted Segment EBITDA and Adjusted Segment EBITDA Margins(cid:3)
(cid:3)
(cid:3)
(cid:58)(cid:72)(cid:86)(cid:87)(cid:53)(cid:82)(cid:70)(cid:78)(cid:3) (cid:88)(cid:86)(cid:72)(cid:86)(cid:3) (cid:179)(cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3) (cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:40)(cid:37)(cid:44)(cid:55)(cid:39)(cid:36)(cid:180)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:179)(cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3) (cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:40)(cid:37)(cid:44)(cid:55)(cid:39)(cid:36)(cid:3) (cid:48)(cid:68)(cid:85)(cid:74)(cid:76)(cid:81)(cid:86)(cid:180)(cid:15)(cid:3) (cid:68)(cid:79)(cid:82)(cid:81)(cid:74)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)
(cid:73)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:74)(cid:68)(cid:76)(cid:81)(cid:86)(cid:87)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:83)(cid:72)(cid:72)(cid:85)(cid:86)(cid:17)(cid:3)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)
(cid:82)(cid:88)(cid:85)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:15)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:15)(cid:3)(cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:15)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:86)(cid:3)(cid:88)(cid:86)(cid:72)(cid:73)(cid:88)(cid:79)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:72)(cid:3)
(cid:58)(cid:72)(cid:86)(cid:87)(cid:53)(cid:82)(cid:70)(cid:78)(cid:182)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:83)(cid:72)(cid:72)(cid:85)(cid:86)(cid:17)(cid:3)(cid:179)(cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:40)(cid:37)(cid:44)(cid:55)(cid:39)(cid:36)(cid:180)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:81)(cid:70)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)
(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:3)(cid:87)(cid:82)(cid:3)(cid:179)(cid:49)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:87)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:87)(cid:3)(cid:68)(cid:3)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:3)(cid:87)(cid:82)(cid:3)(cid:179)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:180)(cid:17)(cid:3)(cid:3)
(cid:3)
(cid:3)
(cid:36)(cid:16)(cid:3)(cid:20)
(cid:54)(cid:72)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:87)(cid:75)(cid:3)(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:81)(cid:70)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:179)(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:40)(cid:37)(cid:44)(cid:55)(cid:39)(cid:36)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:40)(cid:37)(cid:44)(cid:55)(cid:39)(cid:36)(cid:180)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:79)(cid:92)(cid:3)
(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:179)(cid:49)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:87)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:180)(cid:3)(cid:11)(cid:76)(cid:81)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:86)(cid:12)(cid:29)(cid:3)
(cid:3)
(cid:3)
(cid:41)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)
(cid:21)(cid:19)(cid:20)(cid:28)
(cid:41)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)
(cid:21)(cid:19)(cid:20)(cid:27)
(cid:49)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:87)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:27)(cid:25)(cid:21)(cid:17)(cid:28)
(cid:7)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:20)(cid:15)(cid:28)(cid:19)(cid:25)(cid:17)(cid:20)
(cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:29)(cid:3)(cid:11)(cid:20)(cid:12)
(cid:47)(cid:72)(cid:86)(cid:86)(cid:29)(cid:3)(cid:49)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:87)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:81)(cid:82)(cid:81)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:86)
(cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:11)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:12)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)
(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:11)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:12)(cid:15)(cid:3)(cid:81)(cid:72)(cid:87)
(cid:42)(cid:68)(cid:76)(cid:81)(cid:3)(cid:11)(cid:79)(cid:82)(cid:86)(cid:86)(cid:12)(cid:3)(cid:82)(cid:81)(cid:3)(cid:72)(cid:91)(cid:87)(cid:76)(cid:81)(cid:74)(cid:88)(cid:76)(cid:86)(cid:75)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:72)(cid:69)(cid:87)
(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:15)(cid:3)(cid:81)(cid:72)(cid:87)
(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)
(cid:47)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)
(cid:48)(cid:88)(cid:79)(cid:87)(cid:76)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:85)(cid:3)(cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:71)(cid:85)(cid:68)(cid:90)(cid:68)(cid:79)(cid:3)(cid:11)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:12)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)
(cid:42)(cid:68)(cid:76)(cid:81)(cid:3)(cid:11)(cid:79)(cid:82)(cid:86)(cid:86)(cid:12)(cid:3)(cid:82)(cid:81)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)
(cid:49)(cid:82)(cid:81)(cid:16)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)
(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)
(cid:49)(cid:82)(cid:81)(cid:16)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)
(cid:39)(cid:72)(cid:83)(cid:85)(cid:72)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:80)(cid:82)(cid:85)(cid:87)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)
(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:40)(cid:37)(cid:44)(cid:55)(cid:39)(cid:36)
(cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)
(cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:40)(cid:37)(cid:44)(cid:55)(cid:39)(cid:36)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:24)(cid:17)(cid:19)
(cid:21)(cid:26)(cid:25)(cid:17)(cid:27)
(cid:11)(cid:21)(cid:17)(cid:23)(cid:12)
(cid:24)(cid:17)(cid:20)
(cid:23)(cid:22)(cid:20)(cid:17)(cid:22)
(cid:20)(cid:26)(cid:22)(cid:17)(cid:26)
(cid:20)(cid:22)(cid:17)(cid:19)
(cid:11)(cid:25)(cid:17)(cid:22)(cid:12)
(cid:11)(cid:24)(cid:21)(cid:17)(cid:25)(cid:12)
(cid:27)(cid:22)(cid:17)(cid:26)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
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(cid:3)
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STOCKHOLDER INFORMATION
COMPANY ADDRESS
1000 Abernathy Road N.E.
Atlanta, GA 30328
770-448-2193
TRANSFER AGENT AND REGISTRAR
First Class/Registered/Certified Mail:
Computershare Investor Services
PO BOX 505000
Louisville, KY 40233-5000
Courier Services:
Computershare Investor Services
462 South 4th Street Suite 1600
Louisville, KY 40202
INVESTOR RELATIONS
Investor Relations Department
WestRock Company
1000 Abernathy Road N.E.
Atlanta, GA 30328
678-291-7900
Fax: 678-291-7903
AUDITORS
Ernst & Young LLP
55 Ivan Allen Jr. Boulevard
Suite 1000
Atlanta, GA 30308
DIRECT DEPOSIT OF DIVIDENDS
WestRock stockholders may have their
quarterly cash dividends automatically
deposited to checking, savings or
money market accounts through the
automatic clearing house system. If
you wish to participate in the program,
please contact:
Computershare Trust Company, N.A.
800-568-3476
www.computershare.com
ANNUAL MEETING
Westin Buckhead Atlanta
3391 Peachtree Road N.E.
Atlanta, GA 30326
Friday, January 31, 2020, at 9:00 a.m.
COMMON STOCK
Our Common Stock trades on the New
York Stock Exchange under the symbol
“WRK”.
As of December 6, 2019, there were
approximately 6,498 stockholders
of record of our Common Stock. The
number of stockholders of record
includes one single stockholder,
Cede & Co., for all of the shares of our
Common Stock held by our stockholders
in individual brokerage accounts
maintained at banks, brokers and
institutions.
STOCK PERFORMANCE
The graph below reflects the cumulative stockholder return on the investment of $100 on September 30, 2014, in Rock-Tenn Company’s Class A
Common Stock (assuming the reinvestment of dividends) through September 30, 2019, for WestRock Company’s Common Stock compared to the
return on the same investment in the S&P 500 Index and our Industry Peer Group and the reinvestment of dividends. This graph assumes that the
Rock-Tenn Common Stock originally purchased was converted into WestRock Company Common Stock as of July 1, 2015 in connection with the
business combination between MeadWestvaco Corporation and Rock-Tenn Company. Our Industry Peer Group consists of public companies that
either compete directly in one or more of our product lines or are diversified, international manufacturing companies1. ©2019 Standard & Poor’s, a
division of The McGraw-Hill Companies Inc. All rights reserved.
Comparison of 5-Year Cumulative Total Return2
$200
$150
$100
$50
WestRock Co.
S&P 500
New Peer Group
Old Peer Group
09/14/
$100
$100
$100
$100
09/15/
$110.24
$99.39
$90.90
$93.54
09/16/
$119.25
$114.72
$111.95
$114.37
09/17/
$143.78
$136.07
$133.03
$132.57
09/18/
$139.41
$160.44
$142.46
$134.37
09/19/
$99.64
$167.27
$142.63
$128.81
1 Old Peer Group includes: 3M Company, Avery Dennison Corp., Ball Corporation, Crown Holdings, Inc., The Goodyear Tire & Rubber Company, International Paper Company, Kimberly-Clark
Corporation, LyondellBasell Industries NV, Nucor Corporation, Owens-Illinois Inc., Packaging Corporation of America, PPG Industries Inc., United States Steel Corporation and Weyerhaeuser
Company. New Peer Group reflects the addition of Honeywell International Inc., The Sherwin-Williams Company and Freeport-McMoRan Inc. and the removal of Owens-Illinois Inc. The
Compensation Committee made these changes based on the companies’ industry relevance to us, to account for changes in the competitive market for talent and to expand our peer group
sample size and bring its median revenue into better alignment.
2 $100 invested on Sept. 30, 2014, in stock or index, including reinvestment of dividends. Fiscal year ending September 30.
PLEASE RECYCLE
Cover printed on WestRock Tango® 12pt C2S.
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