2020
ANNUAL
REPORT
BOARD OF DIRECTORS
COLLEEN F. ARNOLD
Former Senior Vice President
IBM
Compensation Committee,
Nominating and Corporate Governance Committee
TIMOTHY J. BERNLOHR
Managing Member
TJB Management Consulting, LLC
Executive Committee, Compensation Committee,
Nominating and Corporate Governance Committee
J. POWELL BROWN
President and Chief Executive Officer
Brown & Brown, Inc.
Nominating and Corporate Governance Committee,
Finance 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
SUZAN F. HARRISON
Former President
Global Oral Care, Colgate-Palmolive Company
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.
Executive Committee, Audit Committee,
Compensation Committee
JAMES E. NEVELS
Chairman
The Swarthmore Group
Compensation 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,
Nominating and Corporate Governance Committee
ALAN D. WILSON
(Lead Independent Director)
Former Chairman and Chief Executive Officer
McCormick & Company, Inc.
Executive Committee, Nominating and Corporate
Governance Committee, Finance Committee
LEADERSHIP
STEVEN C. VOORHEES
President and Chief Executive Officer
DONNA OWENS COX
Chief Communications Officer
AMIR A. KAZMI
Chief Information and Digital Officer
VICKI L. LOSTETTER
Chief Human Resources Officer
MARK W. RUSSELL
Senior Vice President
Performance Excellence
and Safety
ROBERT B. MCINTOSH
Executive Vice President
General Counsel and
Secretary
NINA E. BUTLER
Chief Environmental Officer
JEFFREY W. CHALOVICH
Chief Commercial Officer
and President
Corrugated Packaging
PETER C. DURETTE
Chief Strategy Officer
and Executive Vice President
Container
MARGARET HERNDON
Chief Marketing Officer
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
RAJIV BANAVALI
Senior Vice President
Science and Innovation
BRANDI COLANDER
Chief Sustainability Officer
JOHN L. O’NEAL
Executive Vice President
Global Food and Beverage
GEORGE D. OBERNESSER
Senior Vice President
Consumer Mills
PATRICK M. KIVITS
President
Multi Packaging Solutions
WARD H. DICKSON
Executive Vice President
and Chief Financial Officer
JULIA A. MCCONNELL
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:
During the past fiscal year, we’ve witnessed how valuable and essential
packaging is to our customers and the world at large. Against an
extraordinary backdrop, we acted to navigate an ever-shifting supply
chain to meet the demand for essential products and services needed by
consumers. We are reminded daily that our solutions enable our customers
to package and deliver food, beverages, healthcare products, cleaning
products and other essential goods to consumers all over the world.
Our incredible WestRock teammates deserve our deep appreciation
for their resilience and for their uncompromising attention to safety.
The safety of the WestRock team always has been a priority, and faced
with the global pandemic, our protocols shifted quickly to help protect
our teammates. Our dedicated teammates adapted quickly to these
changes so that we could continue to serve our customers, support our
communities and help protect the health of people and their families.
STEVE VOORHEES
Chief Executive Officer
We acted to ensure our ability to navigate in an unpredictable market
from a position of financial strength. Key to this was the initiation in
May 2020 of our Pandemic Action Plan, which included flexibly matching our supply with customer demand, reducing
executive and discretionary expenses, reducing capital expenditures and resetting our quarterly dividend.
We differentiate ourselves in the marketplace with our ability to provide paper, packaging, machinery and displays – and
help manage complex supply chains. Our capabilities and approach are unique in our industry and support our vision
to be the premier partner and unrivaled provider of sustainable, winning solutions for our customers. As our customers
increase their demand for higher-value, more functional packaging solutions, the mix of our business is shifting toward
higher-value packaging solutions and away from lower margin paper markets.
As a result of the platform we have built, the actions we have taken during the past year and current market trends, we are
very well positioned for success over both the short term and long term.
FISCAL 2020 HIGHLIGHTS
I’m extremely proud of WestRock’s performance in fiscal 2020. In the face of a challenging, uncertain market
environment, we delivered $17.6 billion in net sales, adjusted segment EBITDA of $2.8 billion and net cash provided by
operating activities of $2.1 billion.
In fiscal 2020, sales of packaging solutions accounted for $12.5 billion, or 71%, of our total sales. Increasing demand
for e-commerce, more sustainable fiber-based packaging and digitally-enabled solutions drove organic growth of our
packaging solutions volumes to record levels in the September quarter.
We generated $1.15 billion in adjusted free cash flow, marking the fifth consecutive year in which we generated more
than $1 billion in adjusted free cash flow. We achieved this while reducing total debt by $633 million.
We have multiple levers to increase productivity that will help offset anticipated cost inflation and price pressures over
the next year and beyond. Core to our productivity results are the contributions of our teammates, hundreds of which
are trained in Six Sigma, and who execute projects contributing tens of millions of dollars in efficiency savings each and
every year.
We are investing in strategic capital projects, including those at the Florence, South Carolina, and Tres Barras, Brazil mills.
These projects, when combined with the additional run-rate synergies from the KapStone acquisition, are expected to
add more than $125 million of EBITDA in both fiscal 2021 and fiscal 2022.
All told, fiscal 2020 was highlighted by the incredible efforts of our teammates during the pandemic to stay safe and
healthy while nimbly adapting our operations to meet the critical needs of our customers. Working together, we
managed through the challenges of this past year while developing and implementing plans to sustain and grow our
business for the long term.
IMAGINING AND DELIVERING ON A SUSTAINABLE FUTURE
COVID-19 has heightened concerns about the environment and the planet. In fact, sustainable packaging features are
more impactful today than they were before the pandemic. Sustainable fiber-based packaging is a driving factor with
many of our customers as they seek to transition to more sustainable packaging solutions for their customers. We are
extremely well positioned to partner with them to meet this growing need.
Our commitment to sustainability is part of who we are as a company. Our vision for sustainability, Imagining and
Delivering on the Promise of a Sustainable Future, is founded on three main pillars around which we are focusing our
attention and resources:
Supporting People and Communities
Bettering the Planet
Innovating for Our Customers and Their Customers
Our progress is already evident. For the first time, WestRock was named to the 2020 Dow Jones Sustainability North
America and World Indices in recognition of our sustainable business practices.
DIVERSITY, INCLUSION, EQUITY AND BELONGING
Sadly, the past year included tragic events punctuated by the continued senseless loss of life in the African American
community. As we work to support our people and communities, we have developed and are implementing actions that
will start with our leadership and ensure that we push for and enable changes that will make a positive difference for our
WestRock teammates, their families and our broader communities. Our actions are focused on confronting bias, driving
diversity and cultivating equity with a sense of belonging. Everyone at WestRock should feel welcome, heard, valued and
safe every day so that we will create our future together to win together over the short and long term.
LOOKING AHEAD
As we enter fiscal 2021, demand across most of our paper and packaging markets is improving. Over time, we will
continue to grow our participation in higher value packaging solutions markets and reduce our participation in lower
margin paper markets. We will invest in expanding our commercial, operating and innovation capabilities while building
our workplace for the future. Our broad portfolio and capabilities enable us to successfully partner with customers to
help them grow their sales, lower their total costs, meet their sustainability goals and manage their risks.
I am optimistic that we will generate at least $1 billion in adjusted free cash flow in fiscal 2021 for the sixth consecutive
year. As we execute our disciplined capital allocation strategy in the near-term, we will focus on reducing our leverage,
completing our strategic capital projects and maintaining a competitive dividend.
WestRock is the premier partner and unrivaled provider of sustainable, winning solutions for our customers, and we
are delivering value for all our stakeholders, including our customers, teammates and stockholders.
On behalf of the board of directors and all of us at WestRock, we thank you for your investment. And to the entire
incredible WestRock team — thank you for all you do to support our company and our customers.
Stay safe, stay well and stay strong!
Sincerely,
Steve Voorhees
President and Chief Executive Officer
The non-GAAP financial measures Adjusted Segment EBITDA and Adjusted Free Cash Flow 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)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2020
OR
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 No ☐
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 ☐ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer ☐
Emerging growth company ☐
Accelerated filer ☐
Smaller reporting company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
The aggregate market value of the common equity held by non-affiliates of the registrant as of March 31, 2020 (based on the closing price
per share as reported on the New York Stock Exchange on such date), was approximately $7,220 million.
As of November 6, 2020, the registrant had 262,653,756 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 29, 2021 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
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30
30
32
32
33
33
36
55
58
143
143
144
145
146
146
146
146
147
147
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 sustainable, fiber-based paper and packaging solutions. 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.
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
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
Investments” of the Notes to Consolidated Financial Statements for more information.
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 previously sold
real estate, primarily in the Charleston, SC region. We completed the monetization of our assets in the Land and
Development segment during fiscal 2020; therefore, this segment no longer exists.
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 containerboard and paperboard mills, as well as to third parties. Our
Brazil operations own and operate forestlands that provide virgin fiber to our mill in Brazil.
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
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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 help them
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 offer 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, including 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
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 containerboard and paperboard 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 containerboard and paperboard
mills, and sells scrap materials from our converting businesses and mills. Many of our recycling facilities are
located close to our containerboard and paperboard mills, which helps promote the availability of supply with
reduced shipping costs. We conduct our recycling operations as a procurement function, focusing on the
procurement of low cost, high quality recycled fiber for our mill system and, therefore, we do not 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 64.6%, 64.2% and 59.0% of our
net sales in fiscal 2020, 2019 and 2018, 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 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.
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We are one of the largest manufacturers of folding cartons in North America. We believe we are the largest
manufacturer of solid fiber partitions in North America measured by net sales. Our folding 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 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 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 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, producers of beer, food, wine,
spirits, cosmetics and pharmaceuticals, and the automotive industry.
Sales of consumer packaging products to external customers accounted for 35.3%, 35.7% and 40.1% of our
net sales in fiscal 2020, 2019 and 2018, 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
During fiscal 2020, we completed the monetization of the various real estate holdings that we owned that were
concentrated in the Charleston, SC region. Sales in our Land and Development segment to external customers
accounted for 0.1%, 0.1% and 0.9% of our net sales in fiscal 2020, 2019 and 2018, respectively. See “Note 7.
Segment Information” for additional information. We completed the monetization of our assets in the Land and
Development segment during fiscal 2020; therefore, this segment no longer exists.
Seasonality
While our businesses are not materially impacted by seasonality, there is some variability in demand that
occurs from quarter to quarter, with net sales in the first quarter of each fiscal year typically being the lowest. As
such, we disclose net sales, segment income and shipment data by segment by quarter in Item 7. “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”. Generally, we expect more of
our earnings and cash flows to be generated in the second half of the fiscal year than in the first half of the fiscal
year due to these variations and other factors, including the timing of scheduled mill maintenance outages.
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
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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” 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” for additional information regarding our energy consumption.
Transportation
Inbound and outbound freight is a significant cost 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. While we experienced higher freight costs in fiscal 2019, freight costs declined in fiscal
2020. 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”.
Sales and Marketing
None of our external customers individually accounted for more than 10% of our consolidated net sales in
fiscal 2020. We generally manufacture our products pursuant to our 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 2020, 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
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 mill, which is converted into book covers and other products, approximately one-third of our specialty recycled
paperboard tons shipped in fiscal 2020 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
more than 15,000 customers, including 160 customers who buy at least $1 million from both our Corrugated
Packaging and Consumer Packaging 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 and independent distributors. 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.
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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 in which we operate 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 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.
Since 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 sustainability, with varying emphasis on these factors
depending on the product line and customer preferences. Our machinery solutions represent one example of how
we compete by providing differentiated solutions that 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 periodic 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
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. Increasing
demand for more sustainable products is also impacting 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
Our business involves the use of heavy equipment, machinery and chemicals and requires the performance of
activities that create safety exposures. The health and safety of our teammates is our first priority, and we have
established safety policies, programs, procedures and training for our manufacturing operations. We are subject to
a broad range of foreign, federal, state and local laws and regulations relating to occupational health and safety,
and our safety program includes measures required for compliance. In addition, our program includes the ongoing
identification and elimination of workplace exposures that can lead to injuries and sharing of health and safety best
practices.
Certain governmental authorities in locations where we do business have established asbestos standards for
the workplace. Although we do not use asbestos in manufacturing our products, asbestos containing material
(“ACM”) is present in some of the facilities we lease or own. For those facilities where ACM is present and ACM is
subject to regulation, we have established procedures for properly managing it.
We do not believe that future compliance with occupational health and safety laws and regulations will have a
material adverse effect on our results of operations, financial condition or cash flows.
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Environmental
Environmental compliance requirements are a significant factor affecting our business. We employ
manufacturing processes that involve discharges to water, air emissions, water intake and waste handling
activities. 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. Complex and lengthy processes may be required to obtain and renew approvals,
permits, and licenses for new, existing or modified facilities. Additionally, the use and handling of various chemicals
or hazardous materials require release prevention plans and emergency response procedures. Our integrated
chemical pulping mills in the U.S. and Brazil are subject to more stringent environmental programs and regulations,
but all of our manufacturing facilities have environmental compliance obligations.
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.” The U.S. Court of
Appeals for the District of Columbia Circuit issued a ruling on the consolidated cases challenging Boiler MACT on
July 29, 2016 vacating key portions of the rule, including emission limits for certain subcategories of solid fuel
boilers, and sending it back to the EPA for further rulemaking. On August 24, 2020, a proposed EPA rule to amend
Boiler MACT was published in the Federal Register in response to issues raised in multiple court decisions
concerning the rule. The EPA’s proposal would change several numeric emission limits for new and existing
boilers and process heaters, including new fluidized bed boilers and existing coal-fired boilers like those at several
WestRock paper mills. Based on our evaluation of the proposed rule, emissions data and testing, we do not
believe that the capital or operating costs for us to comply with the proposed Boiler MACT limits will be material;
however, we are continuing to track the development of the proposed rule and its potential impacts on us. We
anticipate that we will have up to three years after the effective date of the final rule to demonstrate compliance
with the new Boiler MACT limits.
In addition to Boiler MACT, we are subject to several other federal, state, local and international environmental
rules that may impact our business, including other Maximum Achievable Control Technology standards, National
Ambient Air Quality Standards for nitrogen oxide, sulfur dioxide, fine particulate matter and ozone for facilities and
National Pollutant Discharge Elimination System permitting requirements in the U.S. Legal requirements to review
and revise existing environmental regulations applicable to our business, as well as litigation challenging these
regulations, could result in more stringent or additional compliance obligations that may require capital investments
or increase our operating costs.
We are involved in various administrative and other 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.
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 investigation and remediation 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 damages at these or other sites in the future, could result in
additional costs.
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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 or 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.
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”.
We estimate that we will invest approximately $27 million for capital expenditures during fiscal 2021 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 changes in environmental laws and regulations.
Climate Change
Some of our paper mills, our most energy-intensive manufacturing facilities, burn renewable biomass to
generate more than 60 percent of their energy needs based on overall fuel mix. Most of these facilities also self-
generate the steam and power needed for their manufacturing processes using combined heat and power or
“cogeneration” systems. Our recycling operations help to divert approximately 8 million tons of paper and
packaging from landfills where it would otherwise degrade and release greenhouse gases in the form of methane,
which has a high global warming potential. Our fiber procurement activities create economic incentives for
landowners and family tree farmers to maintain their holdings as working forests that sequester carbon and provide
many other environmental benefits, including protection for fresh water supplies and habitats for diverse species of
plants and animals.
In 2015, the Company established a goal to reduce its Scope 1 and Scope 2 greenhouse gas emissions per
ton of production by 20% from a 2015 baseline by 2020. As of September 30, 2019, we achieved a 15% reduction
of greenhouse gas (“GHG”) per ton of production and an absolute reduction of 21% from our baseline. We have
accomplished these reductions primarily by displacing coal with natural gas and investing in new biomass boilers
at our Covington, VA and Demopolis, AL mills. Our strategy for achieving our existing target includes continued
investments in natural gas projects and infrastructure, as well as implementation of measures to improve the
energy efficiency of our manufacturing operations. Responsibility for tracking performance against our GHG target
is led by our sustainability group, which reports to our Chief Innovation Officer, and the data is verified by our
internal audit department.
Climate change presents opportunities for our business. For example, we produce renewable energy in
abundant amounts and generates renewable energy credits (“RECs”). An entity seeking to reduce its greenhouse
gas profile can purchase our RECs and receive the rights to the environmental attributes of the renewable
electricity generated by our integrated Kraft paper mills. The RECs we generate are flexible, market-based tools
that support the renewable energy market and advance climate-related sustainability initiatives. Our recycling
activities also may present the opportunity to generate offsets that could be used to meet climate-related
obligations for ourselves or others.
Climate change also presents potential risks and uncertainties for us. With respect to physical climate risks,
our manufacturing operations may be impacted by weather-related events such as hurricanes and floods,
potentially resulting in lost production, supply chain disruptions and increased material costs. Unpredictable
weather patterns also may impact virgin fiber prices, which may fluctuate during prolonged periods of heavy rain or
drought. On the other hand, changes in climate also could result in more accommodating weather patterns for
greater periods of time in certain areas, which may create favorable fiber market conditions. We incorporate a
review of meteorological forecast data into our fiber procurement decisions and strategies. To the extent that
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climate-related risks materialize, and we are unprepared for them, we may incur unexpected costs, which could
have a material effect on our financial results of operations.
Responses to climate change may result in regulatory risks as new laws and regulations aimed at mandating
GHG reductions come into effect. These rules and regulations could take the form of cap-and-trade, carbon taxes,
or GHG reductions mandates for utilities that could increase the cost of purchased electricity. New climate rules
and regulations also may result in higher fossil fuel prices or fuel efficiency standards that could increase
transportation costs. Certain jurisdictions in which we have manufacturing facilities or other investments have
already taken actions to address climate change. In the U.S, 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.
In addition to these national efforts, some U.S. states in which we have manufacturing operations, including
Washington, New York and Virginia, are taking measures to reduce GHG emissions, such as requiring GHG
emissions reporting or developing regional cap-and-trade programs. In addition, 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. Other countries in which we conduct business, including China, European Union member states
and India, have set GHG reduction targets in accordance with the agreement signed in April 2016 among over 170
countries that established a framework for reducing global GHG emissions (also known as the “Paris
Agreement”), which became effective in November 2016.
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.
Compliance with climate programs may require future expenditures to meet GHG emission reduction obligations in
future years. These obligations may include carbon taxes, the requirement to purchase GHG credits, or the need to
acquire carbon offsets. Also, we may be required to make capital and other investments to displace traditional
fossil fuels, such as fuel oil and coal, with lower carbon alternatives, such as biomass and natural gas.
Sustainability
At WestRock, we say sustainability is in every fiber of our company. In truth, it forms an integral part of our
busines plan where our goal is to embed sustainability into our culture and strategy to innovate, create value and
build competitive advantage. Our vision, Imagining and Delivering on the Promise of a Sustainable Future, is
represented by three pillars:
Supporting People and Communities
Bettering the Planet
Innovating for Our Customers and Their Customers
We deliver our fiber-based packaging solutions by way of our core purpose, Connecting People to Products®
through safe and sustainable packaging. Paper-based packaging has many attributes that make it well-suited to
helping our customers deliver more sustainable solutions to their customers. It is lightweight, durable, versatile,
made with renewable materials and, in many instances, recyclable or compostable. We believe that our size and
scale, coupled with our history of developing innovative products and solutions, uniquely positions us to help our
customers meet or exceed their sustainability objectives.
We are one of the largest recyclers in the paper industry. We recover 8 million tons annually of paper,
cardboard and other materials, representing waste that would otherwise go into landfills. We use the majority of
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that recovered fiber in our own paper mills to make new products. All of the virgin fiber used by our paper mills in
North America is certified through the Sustainable Forestry Initiative’s Fiber Sourcing Standard.
By operating across the entire supply chain, we are an example of the circular economy in action, using raw
materials that are either recovered or that in many instances can be reused, recycled or composted in a more
sustainable “closed loop” business model. Our customers are increasingly interested in our commitment to
sustainability as our progress with developing more sustainable products helps them achieve their sustainability
goals.
Other examples of our commitment to sustainability include having one of the industry’s largest certified virgin
fiber procurement systems and heading industry-leading foodservice recycling initiatives. We have been
recognized for our sustainability efforts through, among other things, industry award programs and inclusion in the
FTSE 4 Good index.
We are committed to our vision of Imagining and Delivering on the Promise of a More Sustainable Future to
create long-term value for our people, communities, customers and the planet.
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, 2020, we employed approximately 49,300 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 49,300 employees, approximately 71% were hourly and 29% were salaried. Approximately 56% of
our hourly employees in the U.S. and Canada are covered by collective bargaining agreements (“CBAs”), which
typically have four to six-year terms. Approximately 21% of those employees covered under CBAs are operating
under agreements that expire within one year and approximately 15% 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 December 2019, the United Steelworkers Union (“USW”) ratified a new master agreement that applies to
substantially all of our U.S. facilities represented by the USW. The agreement has a four-year term and covers a
number of specific items, including wages, medical coverage and certain other benefit programs, substance abuse
testing, and safety. 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. The master agreement permits us
to apply its terms to USW employees who work at facilities we acquire during the term of the agreement, including
most former MeadWestvaco Corporation, KapStone and other acquired facilities. The master agreement covers
approximately 63 of our U.S. operating locations and approximately 8,700 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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Human Capital
Human Capital Management
The attraction, retention and development of exceptional teammates is critical to our success. We accomplish
this, in part, by developing the capabilities of our team members through our continuous learning, development
and performance management programs. These programs include our safety, six sigma, supply chain, Leadership
Excellence, Commercial Excellence and Manager Fundamentals programs. We sponsor early in career rotations
and college hire programs that support our functions and local operations. We build partnerships with schools,
universities and associations to promote future careers in manufacturing.
The capabilities of our workforce have evolved as our business and strategy have evolved. We have
established new roles reflecting the talent and capabilities needed by our business, both now and for what we
expect in the future. In 2019, we created the roles of Chief Commercial Officer and Chief Innovation Officer,
reflecting our evolving go-to-market strategy and our focus on innovation and organic growth. In 2020, we invested
in roles and capabilities in our workforce to support our business strategy, including hiring a new Chief Marketing
Officer, Chief Sustainability Officer and Senior Vice President of Science and Innovation. We have invested in our
e-commerce and digital technology capabilities through new roles, talent and programs. These investments reflect
our focus on enhancing our capabilities in the areas of sustainability, organic growth, innovation and material
science. As our business evolves, we will remain focused on having the right human capital capabilities, systems
and processes in place to support our strategy.
Safety
The safety of our teammates remains the primary focus of our leaders. Our goal is to create a 100% safe work
environment for our team members. Our safety strategy focuses on the “Four Ps”: people, process, prevention and
performance. We seek to reduce exposures and eliminate life changing events through engagement, execution of
targeted, results-driven activities, and implementing systems that promote continuous improvement. Our
commitment to safety is reinforced by our use of the WestRock Safety Excellence Management System, a robust
safety program and training curriculum.
Throughout the COVID-19 crisis, we have remained focused on protecting the health and safety of our team
members while meeting the needs of our customers. Shortly after the outset of COVID-19, we were an early
adopter of enhanced safety measures and practices across our facilities to protect employee health and safety and
ensure a reliable supply of essential products to our customers. We monitor and track the impact of the pandemic
on our teammates and within our operations, and proactively modify or adopt new practices to promote their health
and safety.
Diversity, Inclusion, Equity and Belonging
Our Diversity, Inclusion, Equity and Belonging objective is to be a company where each of us genuinely
belongs, is respected and valued, and can do our best work, and where diversity, inclusion and equity are
competitive advantages.
At September 30, 2020, 21% of our global workforce was comprised of females and 31% of our U.S. based
workforce was comprised of people of color. Our board of directors includes four females (representing 33% of
directors) and one person of color (representing 8% of directors). We are implementing a multi-year Diversity,
Inclusion, Equity and Belonging action plan that we expect will increase our workforce diversity, advance inclusion,
equity and belonging at all our locations, accelerate the development and career movement of diverse talent and
ensure diverse succession plans such that we continue to create future opportunities for all of our teammates.
In collaboration with organizations, such as the Executive Leadership Council, Pathways and Signature, we
are providing external development opportunities for our diverse talent.
We have included a diversity, inclusion, equity and belonging modifier in our fiscal 2021 short-term incentive
plan for our top 12 executives. The modifier will be tied to the achievement of certain performance measures under
our Diversity, Inclusion, Equity and Belonging action plan.
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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 17.7%, 18.2% and 19.9% of
our net sales in fiscal 2020, 2019 and 2018, 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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that the global impact of COVID-19 continues to evolve rapidly and the extent of its effect on our
operational and financial performance in future periods will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of
the pandemic, the actions taken to contain or mitigate its impact, and the direct and indirect economic
effects of the pandemic and related containment measures, among others;
that our financial results in fiscal 2021 will continue to be impacted by COVID-19;
that as the situation with COVID-19 continues to evolves, we will re-evaluate the level of our dividend;
our expectation that the actions we have undertaken and will continue to undertake pursuant to the
WestRock Pandemic Action Plan will provide an additional $1 billion in cash through the end of fiscal
2021 that we will be able to use to reduce our outstanding indebtedness;
our expectation that our actions under the WestRock Pandemic Action Plan will continue to position us
both to sustain our business in a range of economic and market conditions and position us for long-
term success;
that we will continue to take actions to protect the health and safety of our teammates during COVID-
19;
that we expect to continue to incur expenses for cleaning, safety supplies and equipment, screening
resources and other items related to COVID-19 as needed in the future;
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our belief that we have substantial liquidity to navigate the current dynamic environment;
that, in accordance with the CARES Act (as hereinafter defined), we expect to postpone an estimated
$120 million of employment tax payments over the three quarters ended December 31, 2020 and will
be required to pay 50% of these amounts in December 2021 and the remaining 50% in December
2022;
that although we are not certain whether end market demand trends will continue into future reporting
periods and, if so, for how long and to what degree, we believe the decline in specialty SBS, in
particular for certain end markets, is more systemic;
our belief that our diverse portfolio of paper and packaging products positions us well to adapt and
meet our customers’ changing needs across a broad cross-section of the economy;
that we expect to generate strong cash flows and reduce our debt meaningfully in fiscal 2021;
that we expect to add more than $125 million in EBITDA in fiscal 2021 from capturing synergies
related to the KapStone Acquisition, the new paper machine at our Florence, SC mill, our box plant in
Porto Feliz, Brazil and the reconfiguration at our North Charleston, SC mill;
that in the first quarter of fiscal 2021 we expect a sequential decline in net sales and earnings from the
fourth quarter reflecting the normal seasonal sequential volume declines in many of our businesses;
that we expect higher North American Corrugated box shipments to be offset by three fewer shipping
days during the first quarter of fiscal 2021;
that while volume should remain strong in Brazil, we will execute a significant outage to support our
Tres Barras mill upgrade and estimate 27,000 tons of maintenance downtime;
our expectation of higher energy and transportation costs entering the winter season along with
increased health insurance costs prior to the annual reset of employee deductibles;
our expectation that we will begin accruing short-term incentive payouts for fiscal 2021 at a target level
that is higher than the payout level for fiscal 2020;
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our belief that our payment terms will not be shortened significantly in the near future, and that we do
not expect our net cash provided by operating activities to be significantly impacted by additional
extensions of payment terms; 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 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, service and
sustainability;
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our belief that future compliance with occupational 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, based on our evaluation of the proposed Boiler MACT (as defined herein) rule,
emissions data and testing, the capital or operating costs for the Company to comply with the
proposed Boiler MACT limits will not be material;
that concerns about climate change may result in new laws and regulations that could take the form of
cap-and-trade, carbon taxes or greenhouse gas reductions mandates for utilities that could increase
the cost of purchased electricity;
that China’s ban of all imports of solid waste beginning in 2021 may impact the cost of recycled fiber in
the markets in which we compete and benefit producers that have a high concentration of recycled
fiber mills;
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;
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 but that 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;
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 or retentions, policy limits and other conditions, for certain
environmental matters;
that compliance with climate programs may require future expenditures to meet GHG emission
reduction obligations in future years;
our belief that our size and scale, coupled with our history of developing innovative products and
solutions, uniquely positions us to help our customers meet or exceed their sustainability objectives;
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;
as our business evolves, we will remain focused on having the right human capital capabilities,
systems and processes in place to support our strategy;
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 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 regulations;
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that we may be required to incur additional indebtedness or issue equity securities in order to satisfy
our payment or investment obligations with respect to our joint venture with Grupo Gondi (as
hereinafter defined);
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 demands;
that we 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;
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;
that the upgrade of our mill located in Tres Barras, Brazil is expected to be completed in the first half of
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;
that we will likely engage in future restructuring initiatives;
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;
that with the completion of certain of our strategic projects, we had expected to transition to our long-
range capital expenditure run-rate of approximately $900 million to $1.0 billion a year in fiscal 2021,
however, we expect to invest $800 million to $900 million in fiscal 2021; that at these capital
investment levels, we are confident that we will continue to invest in the appropriate safety,
environmental and maintenance projects, and complete our strategic mill projects while also making
investments to support productivity and growth in our business; and that it is possible that our capital
expenditure assumptions or future estimates 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;
our estimation that we will invest approximately $27 million for capital expenditures during fiscal 2021
in connection with matters relating to environmental compliance;
our expectation that based on current projections, we will utilize nearly all of the remaining U.S. federal
net operating losses and other U.S. federal credits during the current fiscal year and that foreign and
state net operating losses and credits will be used over a longer period of time;
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that, barring significant changes in our current assumptions, including changes in tax laws or tax rates,
forecasted taxable income, levels of capital expenditures and other items, we expect our cash tax rate
to be slightly higher than our income tax rate in fiscal 2021, 2022 and 2023 primarily due to the
absence of certain nonrecurring tax credits, the reduction in capital investments as well as reversal of
prior years’ accelerated tax depreciation causing taxable income to be higher;
our expectation that, based on current facts and assumptions, we will contribute approximately $23
million to our U.S. and non-U.S. pension plans in fiscal 2021;
our estimation that, based on current facts and assumptions, minimum pension contributions to our
U.S. and non-U.S. pension plans will be in the range of approximately $22 million to $23 million
annually in fiscal 2022 through 2025;
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;
that if actual results are not consistent with our assumptions and estimates used to calculate
impairment losses, we may be exposed to additional impairment losses that could be material;
that the global impact of the COVID-19 pandemic may affect our accounting estimates, which may
materially change from period to period due to changing market factors;
that nearly all of our remaining salaried and non-union hourly employees accruing benefits will cease
accruing benefits as of December 31, 2020;
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 impact on our consolidated financial statements;
our belief that our restructuring actions have allowed us to more effectively manage our business;
our belief 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;
that MWV TN (as defined herein) expects to 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, 2020;
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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 but 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;
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 $21.9 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 by the Supreme Court of Brazil with respect to certain state value added tax
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 respond effectively to the impact of
COVID-19; our ability to achieve benefits from acquisitions (including the KapStone Acquisition) and the timing
thereof, including synergies, performance improvements; our ability to successfully implement capital projects
(including our strategic capital projects); the level of demand for our products; our ability to successfully identify
and make performance and productivity improvements; anticipated returns on our capital investments; the
possibility of and 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 equipment costs; fluctuations in selling prices and volumes; intense
competition; the impact of operational restructuring activities; potential liability for outstanding guarantees and
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indemnities and the potential impact of such liabilities; the potential loss of key customers; 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 has been adversely affected in recent years 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. Volumes for certain of the products that we produce were significantly impacted in
fiscal 2020 by COVID-19. The pandemic has affected our operational and financial performance and the extent of
its effect on our operational and financial performance will continue to depend on future developments, which are
highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the
pandemic, the actions taken to contain or mitigate its impact, and the direct and indirect economic efforts of the
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pandemic and related containment measures, among others. 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.
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 paper 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, which resulted in higher levels of recycled fiber supply in the U.S. and lower associated costs for
U.S.-based recycled fiber paper mills. In 2020, we experienced periods of increased recycled fiber costs, including
those driven by the impact of COVID-19. Beginning in 2021, China has announced that it will ban all imports of
solid waste (including unsorted mixed papers), which may impact the cost of recycled fiber in the markets in which
we compete and benefit producers that have a high concentration of recycled fiber mills.
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, for instance, the
profitability of our U.S. operations was adversely impacted by wet weather conditions, 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. If
our competitors are more successful than we are with respect to any key competitive factor, our results of
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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
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
Our Business Has Been, and Will Continue to Be, Impacted by the Outbreak of the COVID-19 Novel
Coronavirus
The global impact of COVID-19 continues to evolve rapidly. COVID-19 has impacted our operations and
financial performance and the extent of its effect on our operational and financial performance in future periods will
depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the
duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, and the direct and
indirect economic effects of the pandemic and related containment measures, among others.
In response to the spread of COVID-19, governmental authorities implemented numerous measures to try to
contain the virus, including travel bans and restrictions, quarantines, shelter-in-place and work from home orders,
and shutdowns of so-called “nonessential” businesses. These measures have impacted, and may further impact,
our workforce and operations, as well as those of our customers, vendors and suppliers. We have manufacturing
operations in the U.S., Canada, Brazil, Mexico, Australia, China and in Europe, and each of these countries or
regions has been affected by the outbreak of COVID-19 and taken various measures to try to contain it. Among
other impacts to our business from the outbreak of COVID-19:
• We have experienced lower overall demand for our products due to economic uncertainty and changing
consumer behaviors driven by COVID-19. For example, we have experienced softer demand in the
commercial print, tobacco, industrial, food service, cosmetics and spirits markets, as these markets have
been adversely impacted by business closures due to government shelter-in-place orders and the adoption
of social distancing practices.
• Our supply chain may be disrupted due to government restrictions or if our suppliers or vendors fail to meet
their obligations to us or experience disruptions in their ability to do so.
• Our production capabilities may be disrupted if we are unable to secure sufficient supplies of raw materials,
if significant portions of our workforce are unable to work effectively, including because of illness,
government actions or other restrictions, or if we have periods of disruptions due to deep cleaning and
sanitizing our facilities. In addition, we have incurred additional expense for cleaning, safety supplies and
equipment, screening resources and other items and expect these costs to continue to some degree in the
future.
• We may experience an increase in commodity and other input costs due to market volatility and product
availability.
• We may experience an increase in our working capital needs or an increase in our trade accounts
receivable write-offs as a result of increased financial pressures on our suppliers and customers.
• We may experience changes to our internal controls over financial reporting as a result of changes in
working environments, such as shelter-in-place and similar orders, as well as the potential for staffing
limitations.
Our business has been, and will continue to be, impacted by the outbreak of the COVID-19 novel coronavirus
and these impacts may adversely affect our results of operations, cash flows and financial conditions, and the
trading price of our Common Stock.
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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 of MeadWestvaco Corporation and Rock-Tenn Company (“RockTenn”) in fiscal 2015 to
form WestRock (the “Combination”), our investments in Gondi, S.A. de C.V. (“Grupo Gondi”) beginning in fiscal
2016, the spinoff of our Specialty Chemicals business in fiscal 2016, the sale of our Home, Health and Beauty
business, a former division of our Consumer Packaging segment (“HH&B”), in fiscal 2017, the acquisition of Multi
Packaging Solutions International Limited, a Bermuda exempted company (“MPS” or “MPS Acquisition”) in fiscal
2017 and the KapStone Acquisition in fiscal 2019, 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. 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; and
we may not be able to integrate KapStone without encountering difficulties and diverting management’s
focus and resources from ordinary business activities and opportunities.
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, and pandemics, including COVID-19, 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, SC 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). Also, in 2019 and 2020, operations at three of our mills located in the southeastern U.S. and
operations at our Evadale, TX and Hodge, LA mills, respectively, were interrupted by hurricanes, resulting in lost
mill production and in fiscal 2020 we experienced a flood at our operations in Guangzhou, China that negatively
impacted our operations.
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. Similarly, New Jersey adopted a law in November 2020 banning single-use paper bags and a number
of other states charge businesses or customers fees to use paper bags. These and similar developments could
adversely impact demand for certain of our products.
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 that we package. Also, there is an increasing focus among consumers to ensure that products
delivered through e-commerce are packaged efficiently. For instance, in 2019 Amazon began requiring all items
sold through Amazon that are larger than a specified size to 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 October 2020, we started up our strategic capital
project at our Florence, SC mill in fiscal 2020 we completed a reconfiguration of our Charleston, SC mill, and we
continue to invest in a strategic project at our Tres Barras, Brazil mill. 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 17.7% of our net sales in fiscal 2020 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 are exposed to varying degrees of economic, political and social instability. In addition, these
countries’ economies and operating environments have been, and likely will continue to be, adversely impacted to
varying degrees by COVID-19. 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
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Any one or more of these risks could adversely affect our international operations and our results of
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. In addition, we facilitate a variety of business processes and activities, including reporting on our
25
business and interacting with customers, vendors and employees. We also collect and store data, including
proprietary business information, and may have access to confidential or personal information that is subject to
privacy and security laws, regulations and customer-imposed controls. Our systems are subject to recurring
attempts by third parties to access information or to disrupt our operations. 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 provider failures, natural disasters or
other catastrophic events. These vulnerabilities may remain undetected for an extended period of time. We may
face other challenges and risks during our integration of acquired businesses and operations as we upgrade and
standardize our information technology systems. We maintain contingency plans and processes 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. 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:
•
general economic and business conditions;
26
•
•
•
•
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
currency versus the U.S. dollar and the impact of a stronger U.S. dollar;
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 tax policy, 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 2020, unemployment rates in
the principal geographic markets that we serve increased significantly and gross domestic product in these
markets decreased significantly, in each case due to COVID-19. These trends resulted in generally lower levels of
demand for our products, which adversely impacted our financial results. 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, 2020, we had $9.4 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 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.
27
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
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, 2020, the carrying value of our goodwill and intangible assets was $9.6 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
2020, we recorded a pre-tax non-cash goodwill impairment of approximately $1.3 billion in our Consumer
Packaging reporting unit. The rest of our reporting units had fair values that exceeded their carrying values by
more 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.
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, prior to 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,
28
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 States, 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
began making monthly payments for the withdrawal liability in fiscal 2020. In February 2020, we received a
demand letter from PIUMPF asserting that we owe $51.2 million for our pro-rata share of PIUMPF’s accumulated
funding deficiency, including interest. We expect to challenge the accumulated funding deficiency demand. 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 our estimated withdrawal liabilities and a summary of all 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 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 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 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.
29
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 and occupational health and safety laws and
regulations that could significantly increase our operating costs and reduce our operational flexibility. Additionally,
changing privacy laws in the United States (where the California Consumer Privacy Act became effective in 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 offices, significant regional offices and operating facilities as of September 30, 2020 are
summarized below:
Segment
Corrugated Packaging
Consumer Packaging
Corporate and significant regional offices
Total
Number of Facilities
Owned Leased
66
44
11
121
115
77
—
192
Total
181
121
11
313
The tables that follow show our annual production capacity in thousands of tons by mill at September 30, 2020,
unless stated otherwise. Our mill system production levels and operating rates may vary from year to year due to
changes in market and other factors, including weather-related events. Our simple average mill system operating
rates for the last three years averaged 93%. We own all of our mills. At September 30, 2020, we also owned
approximately 135,000 acres of forestlands in Brazil.
30
Corrugated Packaging Mills - annual production capacity in thousands of tons
Linerboard Medium
315
510
950
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 (1)
Panama City, FL
Dublin, GA
North Charleston, SC
Seminole, FL
Tres Barras, Brazil (2)
Hopewell, VA
Roanoke Rapids, NC
Tacoma, WA
La Tuque, QC
Cowpens, SC
St. Paul, MN
Morai, India
Total Capacity (3)
185
885
272
137
198
185
548
800
710
353
137
235
402
360
527
290
90
45
185
200
25
6,112 2,587
155
735
292
341
370
210
60
275
345
60
1,355
986
370
352
Total
Capacity
1,200
950
920
885
820
800
710
645
615
605
600
545
527
500
485
476
230
200
180
131 11,893
131
(1) The new machine at the Florence, SC mill started up in October 2020. The table reflects the expected annual
capacity once the strategic project is fully operational.
(2) Reflects our current capacity. Once the expansion project is completed during fiscal 2021, the mill is expected
to produce 750,000 tons annually.
(3) 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 (1)
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 (2)
Bleached
Paperboard
Coated
Natural
Kraft
Coated
Recycled
Paperboard
Specialty
Recycled
Paperboard
Market
Pulp
1,035
950
500
360
170
160
127
111
80
1,810
1,035
648
31
110
110
140
118
64
32
354
Total
Capacity
1,035
950
500
470
170
160
140
127
118
111
80
64
32
3,957
(1) Reflects the expected annual capacity and product mix after the completion of the October 2020 announced
machine shutdown.
(2) Our fiber sourcing for our Consumer Packaging mills is approximately 75% virgin and 25% recycled.
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 overall fiber sourcing for all of our mills is approximately 65% virgin
and 35% recycled.
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.
32
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, 2020, there were approximately 6,313 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
On May 5, 2020, our board of directors declared a quarterly dividend of $0.20 per share for an annual rate of
$0.80 per share, which was lower than our previous quarterly dividend paid in fiscal 2020. We believe that this
reduction in our dividend was prudent given the uncertain market conditions driven by COVID-19 and allowed us to
allocate additional cash to pay down our outstanding debt. As the situation with COVID-19 continues to evolve, we
will re-evaluate the level of our dividend. In August 2020, May 2020, February 2020 and November 2019 we paid a
quarterly dividend of $0.20, $0.20, $0.465 and $0.465 per share, respectively for a total of $1.33 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.
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 operations and consolidated statements of cash flows data for the years ended
September 30, 2020, 2019 and 2018 and the consolidated balance sheet data as of September 30, 2020 and 2019
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, 2017 and 2016 and
the consolidated balance sheet data as of September 30, 2018, 2017 and 2016 from audited financial statements
not included in this report.
33
The impact from acquisitions was the primary driver of the changes in the selected financial data in fiscal 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 Investments” of the Notes to Consolidated Financial Statements for additional information.
The selected financial data has been updated to reflect the spinoff of our Specialty Chemicals business in fiscal
2016. Our results of operations shown below may not be indicative of future results.
(In millions, except per share amounts)
2020
Year Ended September 30,
2018
2017
2019
2016
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)
Goodwill impairment (6)
Gain on sale of HH&B (7)
(Loss) income from continuing operations (8)
Loss from discontinued operations (net of
$17,578.8 $18,289.0 $16,285.1 $14,859.7 $ 14,171.8
$
$
(1.1) $
— $
(6.3) $
— $
184.2 $
— $
— $
— $
—
370.7
— $
$
— $
$
$
112.7 $
$ 1,333.2 $
— $
$
(686.1) $
$
— $
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
tax) (9)
$
— $
— $
— $
— $
(544.7)
Net (loss) income attributable to
common stockholders
Diluted (loss) earnings per share from
continuing operations
Diluted loss per share from discontinued
operations
Diluted (loss) earnings 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 for purchase of businesses,
net of cash acquired
Purchases of common stock
Cash dividends paid to stockholders
$
(690.9) $
862.9 $ 1,906.1 $
708.2 $
(396.3)
$
$
(2.67) $
3.33 $
7.34 $
2.77 $
0.59
— $
— $
— $
— $
(2.13)
$
2.77 $
255.7
1.60 $
40.64 $
3.33 $
259.1
1.82 $
45.27 $
(2.67) $
259.2
1.33 $
40.83 $
7.34 $
259.8
1.72 $
45.24 $
(1.54)
257.9
1.50
$
$
38.75
$28,779.7 $30,156.7 $25,360.5 $25,089.0 $ 23,038.2
$
292.9
$ 9,207.7 $ 9,502.3 $ 5,674.5 $ 5,946.1 $ 5,496.3
$ 9,430.6 $10,063.4 $ 6,415.2 $ 6,554.8 $ 5,789.2
$10,630.6 $11,669.9 $11,469.4 $10,342.5 $ 9,728.8
$ 2,070.7 $ 2,310.2 $ 1,931.2 $ 1,463.8 $ 1,223.3
796.7
$
978.1 $ 1,369.1 $
740.7 $
999.9 $
222.9 $
561.1 $
608.7 $
778.6 $
$
$
$
— $ 3,374.2 $
88.6 $
— $
467.9 $
344.5 $
239.9 $ 1,588.5 $
93.0 $
195.1 $
403.2 $
440.9 $
376.4
335.3
380.7
(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 operations in the line item “Pension
and other postretirement non-service income (expense)”.
34
(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 operations in the line item “Pension and other postretirement non-service income (expense)”.
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)
In fiscal 2020, we recorded a $1,333.2 million pre-tax non-cash goodwill impairment in our Consumer Packaging reporting
unit. 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.
(7) 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.
(8)
(9)
(Loss) income from continuing operations was impacted by multiemployer pension withdrawals, pension risk transfer,
pension lump sum settlement and retiree medical curtailment, net, Land and Development impairments, restructuring and
other costs, the goodwill impairment and the HH&B Sale, 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 (as hereinafter defined). 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 and 2017 was reduced by
$24.7 million and $26.5 million, respectively, pre-tax for the expensing of inventory stepped-up in purchase accounting,
primarily related to the KapStone Acquisition and the MPS Acquisition, respectively.
Loss from discontinued operations, net of tax in fiscal 2016 included a $478.3 million pre-tax non-cash goodwill impairment
charge and $101.1 million pre-tax customer list impairment charge associated with our former Specialty Chemicals
operations.
35
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
We are a multinational provider of sustainable fiber-based paper and packaging solutions. 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
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
Investments” of the Notes to Consolidated Financial Statements for additional information.
Presentation
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 previously sold
real estate, primarily in the Charleston, SC region. We have not included a discussion of the Land and
Development segment below as its net sales and segment income are not significant due to the completion of the
monetization of the real estate holdings. See “Note 7. Segment Information” of the Notes to Consolidated
Financial Statements for the Land and Development disclosures. With the completion of the monetization, this
segment no longer exists.
A detailed discussion of the fiscal 2020 year-over-year changes can be found below and a detailed discussion
of fiscal 2019 year-over-year changes can be found in Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended September 30,
2019.
Acquisitions
From time to time, we have completed acquisitions that have 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
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.
See “Note 3. Acquisitions and Investments” 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”.
36
EXECUTIVE SUMMARY
(In millions)
Net sales
Segment income
Year Ended September 30,
2020
2019
$
$
17,578.8 $
1,362.8 $
18,289.0
1,790.2
In fiscal 2020, we continued to pursue our strategy of offering differentiated and sustainable paper and
packaging solutions that help our customers win. As a result of our broad portfolio, 160 customers bought at least
$1 million from both our Corrugated Packaging and Consumer Packaging segments in fiscal 2020. Net sales of
$17,578.8 million for fiscal 2020 decreased $710.2 million, or 3.9%, compared to fiscal 2019. The decrease was
primarily due to lower selling price/mix and lower volumes excluding acquisitions, including the impact of COVID-
19, as well as unfavorable foreign currency impacts across our segments.
Segment income decreased $427.4 million in fiscal 2020 compared to fiscal 2019, primarily due to lower
Corrugated Packaging and Consumer Packaging segment income. A detailed review of our performance appears
below under “Results of Operations”.
We generated $2,070.7 million of net cash provided by operating activities in fiscal 2020, compared to
$2,310.2 million in fiscal 2019. The decrease was primarily due to lower earnings largely due to lower selling
price/mix, lower volumes excluding acquisitions, including COVID-19, as well as other factors. Given the
uncertainties associated with the severity and duration of COVID-19 as discussed below, in May 2020 we
implemented the WestRock Pandemic Action Plan. See “COVID-19 RESPONSE — WestRock Pandemic Action
Plan” for more information. We invested $978.1 million in capital expenditures in fiscal 2020 while returning $344.5
million in dividends to our stockholders. We believe our strong balance sheet and cash flow provide us the
flexibility to continue to invest to sustain and improve our operating performance. See “Liquidity and Capital
Resources” for more information.
Loss per diluted share was $2.67 in fiscal 2020 compared to earnings per diluted share of $3.33 in fiscal 2019.
Adjusted Earnings Per Diluted Share were $2.75 and $3.98 in fiscal 2020 and 2019, respectively. The loss per
diluted share in fiscal 2020 was driven by a pre-tax non-cash goodwill impairment of $1,333.2 million in our
Consumer Packaging reporting unit.
A detailed review of our fiscal 2020 and 2019 performance appears below under “Results of Operations”.
Expectations for Fiscal 2021 and the First Quarter of Fiscal 2021
We expect to generate strong cash flows and reduce our debt meaningfully in fiscal 2021. We expect capital
investments to be $800 to $900 million, which is higher than the estimates that we incorporated into the WestRock
Pandemic Action Plan due to specific growth projects that we subsequently identified. We expect to complete the
Tres Barras mill upgrade in the first half of 2021 and to add more than $125 million in EBITDA in fiscal 2021 from
capturing synergies related to the KapStone Acquisition, the new paper machine at our Florence, SC mill, our box
plant in Porto Feliz, Brazil and the reconfiguration at our North Charleston, SC mill. We expect that our financial
results in fiscal 2021 will continue to be impacted by COVID-19. See “COVID-19 Response — End Market
Segment Demand Trends” and “COVID-19 Response — Health and Safety of our Teammates” for additional
information.
In the first quarter of fiscal 2021, we expect a sequential decline in net sales and earnings from the fourth
quarter reflecting the normal seasonal sequential volume declines in many of our businesses. We expect higher
North American Corrugated box shipments to be offset by three fewer shipping days during the first quarter of
fiscal 2021. While volume should remain strong in Brazil, we will execute a significant outage to support our Tres
Barras mill upgrade and estimate 27,000 tons of maintenance downtime. We also expect higher energy and
transportation costs entering the winter season along with increased health insurance costs prior to the annual
reset of employee deductibles. In addition, our short-term incentive payouts for fiscal 2020 were below target as
37
part of our pandemic action plan and we will begin accruing short-term incentive payouts for fiscal 2021 at a target
level that is higher than the payout level for fiscal 2020.
WestRock Pandemic Action Plan
COVID-19 RESPONSE
In fiscal 2020, we executed our differentiated strategy with financial strength and substantial liquidity, and we
adapted quickly to changing market conditions as a result of the COVID-19 pandemic. Given the uncertainties
associated with the severity and duration of the pandemic, in May 2020 we announced, and began implementing,
the WestRock Pandemic Action Plan. We have modified the WestRock Pandemic Action Plan as the impact of
COVID-19 has continued and we may further modify it in the future by, for example, changing our capital
expenditure assumptions, future estimates or the duration of the planned items. We expect that the actions that we
have undertaken and will continue to undertake pursuant to the plan will provide an additional $1 billion in cash
through the end of fiscal 2021 that we will be able to use to reduce our outstanding indebtedness. Pursuant to the
WestRock Pandemic Action Plan, we committed ourselves to:
• Continuing to protect the safety and well-being of our teammates, which we continue to do,
• Continuing to match our supply with our customers’ demand, which we continue to do,
• Decreasing the salaries of our senior executive team by up to 25% from May 1, 2020 through December 31,
2020 and decreasing the retainer for members of our board of directors by 25% for the third and fourth
calendar quarters of 2020, in addition to reducing discretionary expenses,
• Using Common Stock to pay our annual incentive for fiscal 2020 for nearly all participants, and setting
the payout level at 50% of the target opportunity subject to a safety modifier that could increase the
target by up to 5% or decrease it by up to 10%,
• Using Common Stock to make Company funded 401(k) contributions (i.e. our employee match of up to
5%) beginning July 1, 2020 for calendar 2020,
o We subsequently determined to fund the Company’s annual 401(k) contribution of 2.5% using Common
Stock
o We subsequently determined to use Common Stock to make Company funded 401(k) contributions
through September 30, 2021
• Reducing fiscal 2020 capital investments by approximately $150 million to approximately $950 million (we
invested $978.1 million in fiscal 2020) and fiscal 2021 capital investments to a range of $600 million to $800
million (which we have subsequently revised to $800 million to $900 million),
•
Postponing an estimated $120 million of employment taxes incurred through the end of calendar year 2020,
pursuant to relief offered under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, and
• Resetting our quarterly dividend to $0.20 per share for an annual rate of $0.80 per share.
In fiscal 2020, we achieved more than $350 million of the $1 billion goal set forth in the WestRock Pandemic
Action Plan. We expect that our actions under the WestRock Pandemic Action Plan will continue to position us
both to sustain our business in a range of economic and market conditions and for long-term success.
Health and Safety of our Teammates
Our first priority is the health and safety of our teammates. We have taken, and continue to take, actions to
protect the health and safety of our teammates during COVID-19, including:
Implementing social distancing practices,
•
• Cleaning and disinfecting workstations and common surfaces frequently and arranging for deep cleaning and
sanitizing of our sites, as needed,
38
• Requiring the use of face coverings to enter our facilities,
•
•
Enforcing quarantine guidelines for team members affected by or potentially exposed to COVID-19, and
Supporting flexible and alternative work arrangements, including a work-from-home strategy for team
members whose jobs can be performed remotely.
We have also implemented health questionnaires and temperature screenings in compliance with applicable
law and launched an online Coronavirus Resource Center to keep our teammates up to date on Company and
health authority information, including information from the World Health Organization and the U.S. Centers for
Disease Control and Prevention.
During fiscal 2020, we provided one-time COVID-19 recognition awards to our teammates who work in
manufacturing and operations and recognized expense of $31.6 million for those awards. During fiscal 2020, we
also incurred an additional expense of $32.4 million for cleaning, safety supplies and equipment, screening
resources and other items. We expect to continue to incur expenses for these items as needed in the future.
Business Continuity
Our business is an essential part of the global supply chain. Our paper and packaging products enable our
customers to package essential food, beverage, health products, cleaning products and other goods. We are
continuing to operate and meet or exceed our customers’ needs in this rapidly evolving demand environment.
We formed a business continuity team comprised of senior leaders throughout our organization that develops
and implements business continuity plans to ensure that our operations are well positioned to continue producing
and delivering products to customers without disruption. The business continuity team meets regularly to identify
and address issues as they arise and focuses on taking actions that address current circumstances associated
with COVID-19 while positioning us for future growth.
Financial Flexibility and Liquidity
We expect the resetting of our dividend from $0.465 per share to $0.20 per share will allow for in excess of
$400 million to be available for debt repayment through the end of fiscal 2021.
In June 2020, WRKCo issued $600.0 million aggregate principal amount of its 3.00% Senior Notes due 2033.
At September 30, 2020, we had approximately $3.6 billion of availability under long-term committed credit facilities
and cash and cash equivalents. We have limited debt maturities prior to March 2022. We believe that we have
substantial liquidity to navigate the current dynamic environment, and remain focused on maintaining our
investment grade rating and managing our working capital and taking appropriate actions to ensure our access to
necessary liquidity.
The CARES Act allows employers to postpone paying their share of employment taxes incurred through the
end of calendar year 2020. We expect to postpone an estimated $120 million of such payments over the three
quarters ended December 31, 2020 and will be required to pay 50% of these amounts in December 2021 and the
remaining 50% in December 2022.
End Market Segment Demand Trends
End market demand trends continue to be impacted by COVID-19. Since the onset of COVID-19, we have
experienced strong sequential demand from the e-commerce, food, and healthcare end markets. As we exited the
fourth quarter of fiscal 2020, corrugated container volumes increased, and October 2020 shipments continued to
rise as compared to the prior year. However, we have also experienced lower sales in other market segments,
including specialty solid bleached sulphate (“SBS”), especially for commercial print, tobacco, plate and cup stock
markets. Although we are not certain whether these trends will continue into future reporting periods and, if so, for
how long and to what degree, we believe the decline in specialty SBS, in particular for certain end markets, is more
systemic. Our view of related growth and earnings opportunities has been diminished in the foreseeable future. As
39
a result of the expected lower volumes and cash flows, in the fourth quarter of fiscal 2020 we recorded a non-cash
goodwill impairment charge of $1.3 billion pre-tax in our Consumer Packaging reporting unit. In October 2020, we
announced the shut-down of one of our SBS paper machines at our Evadale, TX mill, which will result in the
removal of 200,000 tons of capacity.
We believe that our diverse portfolio of sustainable fiber-based paper and packaging solutions positions us
well to adapt and meet our customers’ changing needs across a broad cross-section of the economy. In particular,
for customers and markets that have had increased demand, the scale of our operations has enabled us to partner
with our customers to support these needs.
RESULTS OF OPERATIONS
The following table summarizes our consolidated results for the two years ended September 30, 2020:
(In millions)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative, excluding intangible
amortization
Selling, general and administrative intangible amortization
Gain on disposal of assets
Multiemployer pension withdrawal income
Land and Development impairments
Restructuring and other costs
Goodwill impairment
Operating (loss) 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
(Loss) income before income taxes
Income tax expense
Consolidated net (loss) income
Less: Net income attributable to noncontrolling interests
Net (loss) income attributable to common stockholders
Year Ended September 30,
2020
2019
$
17,578.8 $
14,381.6
3,197.2
18,289.0
14,540.0
3,749.0
1,624.4
400.5
(16.3)
(1.1)
—
112.7
1,333.2
(256.2)
(393.5)
(1.5)
103.3
9.5
15.8
(522.6)
(163.5)
(686.1)
(4.8)
(690.9) $
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
$
Net Sales (Unaffiliated Customers)
Net sales in fiscal 2020 decreased $710.2 million, or 3.9%, compared to fiscal 2019. The decrease was
primarily due to lower selling price/mix and lower volumes excluding acquisitions, including the impact of COVID-
19, as well as unfavorable foreign currency impacts across our segments. These decreases were partially offset by
higher containerboard volumes and the impact of the KapStone Acquisition as the prior year included only eleven
months of KapStone ownership (the transaction closed on November 2, 2018). The change in net sales by
segment is outlined below in “Results of Operations — Corrugated Packaging Segment” and “Results of
Operations — Consumer Packaging Segment”.
Cost of Goods Sold
Cost of goods sold decreased to $14,381.6 million in fiscal 2020 compared to $14,540.0 million in fiscal 2019.
Cost of goods sold as a percentage of net sales was 81.8% in fiscal 2020 compared to 79.5% in fiscal 2019. The
decrease in cost of goods sold in fiscal 2020 compared to fiscal 2019 was primarily due to a decrease in net sales,
40
productivity improvements, net cost deflation and lower depreciation, which were partially offset by increased cost
of goods sold associated with the impact of acquisitions (primarily an additional month of KapStone ownership in
fiscal 2020), one-time COVID-19 recognition awards to our teammates who work in manufacturing and operations
and other manufacturing cost increases, including increased costs resulting from the North Charleston, SC mill
reconfiguration and Florence, SC mill strategic capital project, as well as increased costs for safety, cleaning and
other items related to COVID-19. In fiscal 2020 and 2019, we incurred approximately $4.5 million and $113.9
million, respectively, of direct costs and property damage associated with Hurricane Michael, and received
Hurricane Michael-related insurance proceeds of $32.3 million and $180.0 million, respectively, which were
recorded as a reduction of cost of goods sold in our Corrugated Packaging segment. The insurance proceeds were
for $20.6 million and $124.7 million of direct costs and property damage for fiscal 2020 and 2019, respectively, and
for $11.7 million and $55.3 million for business interruption recoveries, respectively. See “Hurricane Michael”
below for additional information. In fiscal 2020 and 2019, we recorded a reduction of cost of goods sold of $32.1
million and $11.4 million, respectively, in connection with an indirect tax claim in Brazil, primarily in the Corrugated
Packaging segment. See “Note 18. Commitments and Contingencies — Indirect Tax Claim” of the Notes to
Consolidated Financial Statements for additional information. In fiscal 2019, we recorded a $24.7 million
acquisition inventory step-up charge in our Corrugated Packaging segment related to the KapStone Acquisition.
We discuss these items in greater detail below in “Results of Operations — Corrugated Packaging Segment”
and “Results of Operations — Consumer Packaging Segment”.
Selling, General and Administrative Excluding Intangible Amortization
Selling, general, and administrative expenses (“SG&A”) excluding intangible amortization decreased $90.8
million to $1,624.4 million in fiscal 2020 compared to fiscal 2019 in part, due to a $31.3 million reduction in bonus
compensation expense primarily associated with the Pandemic Action Plan, a $38.3 million reduction in travel and
entertainment, and other reductions associated with the implementation of shelter-in-place orders that were
initiated in response to COVID-19. Decreases for fiscal 2020 were partially offset by an additional month of
KapStone ownership in fiscal 2020, as well as a $9.9 million increase in bad debt expense compared to the prior
year. SG&A excluding intangible amortization as a percentage of net sales declined in fiscal 2020 to 9.2% from
9.4% in fiscal 2019.
Selling, General and Administrative Intangible Amortization
SG&A intangible amortization was $400.5 million and $400.2 million in fiscal 2020 and 2019, respectively.
Fiscal 2020 included an additional month of KapStone ownership in fiscal 2020.
Gain on Disposal of Assets
The gain on disposal of assets in fiscal 2020 was $16.3 million and the gain on disposal of assets in fiscal 2019
was $41.2 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.
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. This charge is not reflected in segment income.
Restructuring and Other Costs
We recorded aggregate pre-tax restructuring and other costs of $112.7 million and $173.7 million for fiscal
2020 and 2019, respectively. These amounts are not comparable since the timing and scope of the individual
actions associated with each restructuring, acquisition, integration or divestiture vary. 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. 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”.
41
Goodwill Impairment
In fiscal 2020, we recorded a pre-tax non-cash goodwill impairment of $1,333.2 million in our Consumer
Packaging reporting unit. The impairment is described below in “Critical Accounting Policies and Significant
Accounting Estimates — Goodwill” of the Notes to Consolidated Financial Statements.
Interest Expense, net
Interest expense, net was $393.5 million and $431.3 million for fiscal 2020 and 2019, respectively. Interest
expense, net in fiscal 2020 decreased primarily due to $20.5 million of interest income recorded in connection with
an indirect tax claim in Brazil compared to $0.8 million in fiscal 2019, lower levels of debt and lower interest rates in
the current year period. These increases were partially offset by an additional month of interest expense
associated with the KapStone Acquisition in the current year compared to the prior year. See “Note 18.
Commitments and Contingencies — Indirect Tax Claim” of the Notes to Consolidated Financial Statements for
additional information. 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 $103.3 million and $74.2 million in fiscal 2020 and
2019, respectively. The increases were primarily due to the increase in plan asset balances used to determine the
expected return on plan assets for fiscal 2020. Customary pension and other postretirement (income) costs are
included in segment income. See “Note 5. Retirement Plans” of the Notes to Consolidated Financial Statements
for more information.
Other Income, net
Other income, net was $9.5 million and $2.4 million in fiscal 2020 and 2019, respectively.
Provision for Income Taxes
We recorded income tax expense of $163.5 million for fiscal 2020 at an effective tax rate of (31.3)%, due to the
loss before income tax in fiscal 2020, compared to an income tax expense of $276.8 million at an effective tax rate
of 24.2% in fiscal 2019. Excluding the effect of the goodwill impairment, which was largely not tax deductible, our
effective tax rate was 22.5%. See “Note 6. Income Taxes” of the Notes to Consolidated Financial Statements for
additional information, including a table reconciling the statutory federal tax rate to our effective tax rate.
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 on the two paper machines and related infrastructure during June 2019. In fiscal 2019, we received
$180.0 million of insurance proceeds. In the first quarter of fiscal 2020, we settled our property damage and
business interruption insurance claim for $212.3 million (net of our $15 million deductible), and received the
remaining $32.3 million of insurance proceeds.
The insurance proceeds received in fiscal 2020 consisted of $11.7 million of business interruption recoveries
and $20.6 million for direct costs and property damage. In fiscal 2019, we received insurance proceeds of $180.0
million. The insurance proceeds for fiscal 2019 consisted of $55.3 million of business interruption recoveries and
$124.7 million for direct costs and property damage.
Corrugated Packaging Segment
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
42
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. In the second quarter of fiscal 2020, we
adjusted the second quarter and full year fiscal 2019 amounts in the table below by an immaterial amount to adjust
the acquired KapStone operations. The table below reflects shipments in thousands of tons, BSF and millions of
square feet (“MMSF”) per shipping day. The number of shipping days vary by geographic location.
North American Corrugated Packaging Shipments
Fiscal 2019
North American Corrugated Packaging
Shipments - thousands of tons
North American Corrugated Containers
Shipments - BSF
North American Corrugated Containers Per
Shipping Day - MMSF
Fiscal 2020
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
2,346.7 2,510.2 2,644.2 2,616.4 10,117.5
22.5
23.4
24.3
24.1
94.3
369.4
372.2
384.7
382.7
377.3
2,591.2 2,618.8 2,504.4 2,504.4 10,218.8
23.9
23.8
23.2
24.9
95.8
385.9
371.2
369.3
388.0
378.6
Fiscal 2019
Brazil / India Corrugated Packaging Shipments
- thousands of tons
185.6
176.5
171.0
194.6
727.7
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 2020
Brazil / India Corrugated Packaging Shipments
1.6
1.5
1.6
1.7
6.4
20.7
20.6
21.0
21.8
21.0
- thousands of tons
168.1
182.5
176.4
185.1
712.1
Brazil / India Corrugated Containers Shipments
- BSF
Brazil / India Corrugated Containers Per
Shipping Day - MMSF
1.7
1.6
1.6
1.9
6.8
22.9
21.3
21.0
24.3
22.4
43
Corrugated Packaging Segment – Net Sales and Income
(In millions, except percentages)
Net Sales (1)
Segment
Income
Return
on Sales
Fiscal 2019
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Fiscal 2020
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
$
$
$
$
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
2,909.5 $
2,882.5
2,728.8
2,898.4
11,419.2 $
283.4
244.5
227.9
281.9
1,037.7
9.0%
10.4
12.8
14.9
11.8%
9.7%
8.5
8.4
9.7
9.1%
(1) Net Sales before intersegment eliminations
Net Sales (Aggregate) — Corrugated Packaging Segment
Net sales before intersegment elimination for the Corrugated Packaging segment decreased $397.5 million in
fiscal 2020 compared to fiscal 2019 primarily reflecting $447.1 million from lower selling price/mix on sales, $150.3
million of lower volumes excluding acquisitions, including the impact of COVID-19, as well as $93.2 million related
to unfavorable impacts of foreign currency. These items were partially offset by $278.3 million of net sales from the
acquired KapStone operations for October 2019 as fiscal 2020 included an additional month of KapStone
ownership.
Segment Income — Corrugated Packaging Segment
Segment income attributable to the Corrugated Packaging segment in fiscal 2020 decreased $361.9 million
compared to fiscal 2019, primarily due to the margin impact of lower selling price/mix of $466.4 million, $55.3
million of lower volumes excluding acquisitions, including the impact of COVID-19, $22.7 million of unfavorable
foreign currency impacts, and other manufacturing cost increases, including estimated increased costs of $43.4
million associated with the North Charleston, SC mill reconfiguration and Florence, SC mill strategic capital project,
one-time COVID-19 recognition awards to our teammates who work in manufacturing and operations and
increased costs for safety, cleaning and other items related to COVID-19. Since we started tracking and reporting
the impact of COVID-19 in the third quarter of fiscal 2020, we have made one-time COVID-19 recognition awards
to our manufacturing and operations teammates and incurred increased costs for safety, cleaning and other items
related to COVID-19 of approximately $33.5 million. These decreases were partially offset by the net favorable
impact of Hurricane Michael in fiscal 2020 compared to fiscal 2019. The net recovery of Hurricane Michael direct
costs and property damage was a favorable $5.3 million compared to the prior year net expense incurred, and the
impact of business interruption recoveries in the current year period compared to lost production and sales net of
recoveries in the prior year were an estimated favorable $25.1 million. In addition, we realized an estimated $115.8
million of productivity improvements, an estimated $30.5 million decreased impact of economic downtime, $18.4
million for an indirect tax claim in Brazil and an estimated $11.8 million of net cost deflation, each as compared to
the prior year. See “Note 18. Commitments and Contingencies — Indirect Tax Claim” of the Notes to
Consolidated Financial Statements for additional information. Net cost deflation consisted primarily of lower
energy, virgin fiber, freight and chemical costs that were partially offset by higher recovered fiber, and wage and
other costs compared to the prior year. The prior year included an acquisition inventory step-up charge of $24.7
million.
44
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 shipment data table excludes gypsum paperboard liner tons produced by Seven
Hills since it is not consolidated.
Fiscal 2019
Consumer Packaging Shipments - thousands
of tons
Fiscal 2020
Consumer Packaging Shipments - thousands
of tons
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Fiscal
Year
969.6
985.5
980.1
974.0 3,909.2
922.4
987.7
984.5
976.8 3,871.4
Consumer Packaging Segment – Net Sales and Income
(In millions, except percentages)
Net Sales (1)
Segment
Income
Return
on Sales
Fiscal 2019
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Fiscal 2020
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
$
$
$
$
1,618.8 $
1,668.3
1,650.1
1,668.8
6,606.0 $
1,536.9 $
1,616.3
1,552.6
1,627.2
6,333.0 $
76.9
85.2
91.0
135.0
388.1
46.2
90.8
95.3
91.4
323.7
4.8%
5.1
5.5
8.1
5.9%
3.0%
5.6
6.1
5.6
5.1%
(1) Net Sales before intersegment eliminations
Net Sales (Aggregate) — Consumer Packaging Segment
Net sales before intersegment eliminations for the Consumer Packaging segment decreased $273.0 million in
fiscal 2020 compared to the prior year primarily due to $145.3 million of lower volumes, including the impact of
COVID-19, $100.5 million of lower selling price/mix on sales and $30.2 million of unfavorable foreign currency
impacts.
Segment Income — Consumer Packaging Segment
Segment income attributable to the Consumer Packaging segment in fiscal 2020 decreased $64.4 million
compared to the prior year. Segment income in the period was reduced by an estimated $69.5 million of margin
impact from lower selling price/mix, an estimated $53.4 million of economic downtime, $51.5 million of lower
volumes, including the impact of COVID-19, $10.3 million of unfavorable foreign currency impacts, and other items.
These items were partially offset by $69.0 million of productivity improvements, an estimated $40.1 million of net
cost deflation and $22.6 million of lower depreciation and amortization, each as compared to the prior year. Net
cost deflation consisted primarily of lower virgin fiber, chemical, energy, and freight costs, which were partially
offset wage and other costs. Recovered fiber costs were essentially flat. Since we started tracking and reporting
45
the impact of COVID-19 in the third quarter of fiscal 2020, we have made one-time COVID-19 recognition awards
to our manufacturing and operations teammates and incurred increased costs for safety, cleaning and other items
related to COVID-19 of approximately $25.1 million.
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
credit facilities. As such, our foreign cash and cash equivalents are not expected to be a key source of liquidity to
our domestic operations.
Cash and cash equivalents were $251.1 million at September 30, 2020 and $151.6 million at September 30,
2019. Approximately one-half of the cash and cash equivalents at September 30, 2020 were held outside of the
U.S. At September 30, 2020, total debt was $9,430.6 million, $222.9 million of which was current. At
September 30, 2019, total debt was $10,063.4 million, $561.1 million of which was current. Included in our total
debt at September 30, 2020 was $208.9 million of non-cash acquisition related step-up. Total debt declined
compared to the prior year primarily due to net cash provided by operating activities exceeding aggregate capital
expenditures and dividends by $748.1 million, which was partially offset by a $99.5 million increase in our cash and
cash equivalents balance. This includes the achievement of more than $350 million of the $1 billion goal set forth in
the WestRock Pandemic Action Plan. In addition, debt was also increased by $100.3 million related to our October
1, 2019 adoption of the leasing guidance codified in Financial Accounting Standards Board’s (“FASB”) Accounting
Standards Codification (“ASC”) 842 “Leases” (“ASC 842”) that recharacterized $100.3 million from short-term and
long-term liabilities for two chip mills to a finance lease obligation.
In June 2020, WRKCo issued $600.0 million aggregate principal amount of its 3.00% Senior Notes due 2033
(the “June 2033 Notes”). We may redeem the June 2033 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 June 2033
Notes were primarily used to repay the $100.0 million principal amount of WestRock MWV, LLC’s (“MWV”) 9.75%
notes due June 2020 and reduce outstanding indebtedness under our Receivables Securitization Facility and
Revolving Credit Facility (each as hereinafter defined). See “Note 13. Debt” of the Notes to Consolidated Financial
Statements for additional information.
At September 30, 2020, we had approximately $3.6 billion of availability under long-term committed credit
facilities and cash and cash equivalents. Our primary availability is under our revolving credit facilities and
Receivables Securitization Facility, the majority of which matures on November 21, 2024. This liquidity may be
used to provide for ongoing working capital needs and for other general corporate purposes, including acquisitions,
dividends and stock repurchases. We have limited debt maturities prior to March 2022.
Certain restrictive covenants govern our maximum availability under the credit facilities. We test and report our
compliance with these covenants as required by these facilities and were in compliance with all of these covenants
at September 30, 2020.
At September 30, 2020, we had $62.9 million of outstanding letters of credit not drawn upon.
We use a variety of working capital management strategies including supply chain financing ("SCF") programs,
vendor financing and commercial card programs, a monetization facility where we sell short-term receivables to a
group of third-party financial institutions and a receivables securitization facility. We describe these programs
below and, in the Notes to Consolidated Financial Statements.
We engage in certain customer-based SCF programs to accelerate the receipt of payment for outstanding
accounts receivables from certain customers. Certain costs of these programs are borne by the customer or us.
Receivables transferred under these customer-based supply chain finance programs generally meet the
requirements to be accounted for as sales in accordance with guidance under ASC 860 “Transfers and Servicing”
46
resulting in derecognition of such receivables from our consolidated balance sheets. Receivables involved with
these customer-based supply chain finance programs constitute approximately 2% of our annual net sales. In
addition, we have a monetization facility which sells to a third-party financial institution all of the short-term
receivables generated from certain customer trade accounts. For a discussion of our monetization facility see
“Note 12. Fair Value — A/R Sales Agreement”.
Our working capital management strategy includes working with our suppliers to revisit terms and conditions,
including the extension of payment terms. Our current payment terms with the majority of our suppliers generally
range from payable upon receipt to 120 days, and vary for items such as the availability of cash discounts. We do
not believe our payment terms will be shortened significantly in the near future, and we do not expect our net cash
provided by operating activities to be significantly impacted by additional extensions of payment terms. Certain
financial institutions offer voluntary SCF programs that enable our suppliers, at their sole discretion, to sell their
receivables from us to the financial institutions on a non-recourse basis at a rate that leverages our credit rating
and thus might be more beneficial to our suppliers. We and our suppliers agree on commercial terms for the goods
and services we procure, including prices, quantities and payment terms, regardless of whether the supplier elects
to participate in SCF programs. The suppliers sell us goods or services and issue the associated invoices to us
based on the agreed-upon contractual terms. The due dates of the invoices are not extended due to the supplier’s
participation in SCF programs. Our suppliers, at their sole discretion if they choose to participate in a SCF
program, determine which invoices, if any, they want to sell to the financial institutions. No guarantees are provided
by us under SCF programs and we have no economic interest in a supplier’s decision to participate in the SCF
program. Therefore, amounts due to our suppliers that elect to participate in SCF programs are included in the line
item accounts payable and accrued expenses in our consolidated balance sheet and the activity is reflected in net
cash provided by operating activities in our consolidated statements of cash flows. Based on correspondence with
the financial institutions that are involved with our two primary SCF programs, while the amount suppliers elect to
sell to the financial institutions varies from period to period, the amount generally averages approximately 15% of
our accounts payable balance.
We also participate in certain vendor financing and commercial card programs to support our travel and
entertainment expenses and smaller vendor purchases. Amounts outstanding under these programs are classified
as debt primarily because we receive the benefit of extended payment terms and a rebate from the financial
institution that we would not have otherwise received without the financial institutions’ involvement. We also have a
receivables securitization facility (as defined herein) that allows for borrowing availability based on the eligible
underlying accounts receivable and compliance with certain covenants. For a discussion of our receivables
securitization facility and the amount outstanding under our vendor financing and commercial card programs see
“Note 13. Debt” of the Notes to Consolidated Financial Statements for additional information.
Cash Flow Activity
(In millions)
Net cash provided by operating activities
Net cash used for investing activities
Net cash (used for) provided by financing activities
Year Ended September 30,
2020
2019
$
$
$
2,070.7 $
(921.5) $
(1,021.1) $
2,310.2
(4,579.6)
1,780.2
Net cash provided by operating activities during fiscal 2020 decreased $239.5 million from fiscal 2019 primarily
due to lower consolidated net income and a $117.7 million net increase in the use of working capital compared to
the prior year.
Net cash used for investing activities of $921.5 million in fiscal 2020 consisted primarily of $978.1 million for
capital expenditures that was partially offset by $35.0 million of proceeds from the sale of property, plant and
equipment and $16.9 million of proceeds from corporate owned life insurance benefits. 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
47
proceeds from corporate owned life insurance benefits and $25.5 million of proceeds from property, plant and
equipment insurance proceeds related to our Panama City, FL mill.
Under the WestRock Pandemic Action Plan, which we announced in May 2020 in response to the COVID-19
pandemic, we expected to reduce our fiscal 2020 capital expenditures by approximately $150 million to
approximately $950 million. Fiscal 2020 capital expenditures aggregated $978.1 million in fiscal 2020, including
work on our strategic projects at our Florence, SC and Tres Barras, Brazil mills. We also had to navigate the
impact of shelter-in-place and other similar restrictions and the availability of contract and technical resources as a
result of COVID-19. We started up the paper machine at our Florence, SC mill in October 2020 and expect to
increase capacity during fiscal 2021. The Tres Barras mill upgrade project should be completed in the first half of
2021. With the expected completion of certain of our strategic projects, we had expected to transition to our long-
range capital expenditure run-rate of approximately $900 million to $1.0 billion a year in fiscal 2021. We expect to
invest $800 million to $900 million in fiscal 2021, which is higher than the estimates that we incorporated into the
WestRock Pandemic Action Plan due to specific growth projects that we subsequently identified. At these capital
investment levels, we are confident that we will continue to invest in the appropriate safety, environmental and
maintenance projects, and complete our strategic mill projects while also making investments to support
productivity and growth in our business. 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.
In fiscal 2020, net cash used for financing activities of $1,021.1 million consisted primarily of a net decrease in
debt of $673.9 million and cash dividends paid to stockholders of $344.5 million. 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.
We estimate that we will invest approximately $27 million for capital expenditures during fiscal 2021 in
connection with matters relating to environmental compliance. We were obligated to purchase approximately $310
million of fixed assets at September 30, 2020 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, 2020 the U.S. federal, state and foreign net operating losses and other U.S. federal and
state tax credits available to us aggregated approximately $78 million in future potential reductions of U.S. federal,
state and foreign cash taxes. Based on our current projections, we expect to utilize nearly all of the remaining U.S.
federal net operating losses and other U.S. federal credits during the current fiscal year. Foreign and state net
operating losses and credits will be used over a longer period of time. Our cash tax rate is highly dependent on our
taxable income, utilization of net operating losses and credits, changes in tax laws or tax rates, capital
expenditures or other factors. Barring significant changes in our current assumptions, including changes in tax
laws or tax rates, forecasted taxable income, levels of capital expenditures and other items, we expect our cash tax
rate to be slightly higher than our income tax rate in fiscal 2021, 2022 and 2023 primarily due to the absence of
certain nonrecurring tax credits, the reduction in capital investments, as well as reversal of prior years’ accelerated
tax depreciation causing taxable income to be higher.
During fiscal 2020 and 2019, we made contributions of $22.5 million and $25.1 million, respectively, to our U.S.
and non-U.S. pension plans. Based on current facts and assumptions, we expect to contribute approximately $23
million to our U.S. and non-U.S. pension plans in fiscal 2021. 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 overfunded status of our U.S. and non-U.S. pension plans at September 30, 2020 was $51.7 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 approximately $22 million to $23 million annually in fiscal 2022 through 2025.
See “Note 5. Retirement Plans” of the Notes to Consolidated Financial Statements.
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
48
basis (approximately $0.7 million per month for the next 20 years) with respect to our withdrawal liability. The initial
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 of ours 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 received an updated demand letter decreasing the
accumulated funding deficiency demand from $2.0 million to $1.3 million in April 2020. In February 2020, we
received a demand letter from PIUMPF asserting that we owe $51.2 million for our pro-rata share of PIUMPF’s
accumulated funding deficiency, including interest. We are evaluating each of these demands and we expect to
challenge the accumulated funding deficiency demands. We began making monthly payments for these
withdrawal liabilities in fiscal 2020, excluding the accumulated funding deficiency demands. 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”.
On May 5, 2020, our board of directors declared a quarterly dividend of $0.20 per share for an annual rate of
$0.80 per share, which was lower than our previous quarterly dividend paid in fiscal 2020. We believe that this
reduction in our dividend was prudent given the uncertain market conditions driven by COVID-19 and allowed us to
allocate additional cash to pay down our outstanding debt. As the situation with COVID-19 continues to evolve, we
will re-evaluate the level of our dividend. In August 2020, May 2020, February 2020 and November 2019 we paid a
quarterly dividend of $0.20, $0.20, $0.465 and $0.465 per share, respectively for a total of $1.33 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.
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
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
2020, we repurchased no shares of our Common Stock. In fiscal 2019, we repurchased approximately 2.1 million
shares of our Common Stock for an aggregate cost of $88.6 million. As of September 30, 2020, 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, 2020, 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.
49
(In millions)
Total
and 2022
and 2025 Thereafter
Payments Due by Period
Fiscal
2023
Fiscal
2024
Fiscal
2021
Long-Term Debt, including current portion,
excluding finance lease obligations (1)
Lease obligations (2)
Purchase obligations and other (3) (4) (5)
Total
214.2 $ 1,077.8 $ 1,986.8 $ 5,729.1
$ 9,007.9 $
452.7
205.0
1,138.0
1,669.2
339.7
989.4
$11,815.1 $ 1,408.6 $ 1,583.9 $ 2,301.1 $ 6,521.5
299.0
207.1
181.3
133.0
(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 $147.9 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. Leases” of the Notes to Consolidated Financial Statements for additional information.
(3) 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.
(4) We have included future estimated minimum pension plan contributions, MEPP withdrawal payments with definite payout
terms 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 $73.3 million of MEPP
withdrawal liabilities recorded as of September 30, 2020, including our estimate of the accumulated funding deficiency, due
to lack of 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.
(5) 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.
$246.0 million for certain provisions of ASC 740, “Income Taxes” associated with liabilities, primarily 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 “Business — Governmental
Regulation — Climate Change” for a discussion of our expenditures for environmental compliance.
NON-GAAP FINANCIAL MEASURES
We report our financial results in accordance with generally accepted accounting principles in the U.S.
(“GAAP”). However, management believes certain non-GAAP financial measures provide investors and other
users with additional meaningful information that should be considered when assessing our ongoing performance.
Management also uses these non-GAAP financial measures in making financial, operating and planning decisions,
and in evaluating our performance. 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 presented by other companies.
We use the non-GAAP financial measures “Adjusted Net Income” and “Adjusted Earnings Per Diluted Share”.
50
Management believes these measures provide our board of directors, investors, potential investors, securities
analysts and others with useful information to evaluate our performance because they 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 (loss) income attributable to common stockholders and (Loss) earnings per
diluted share, respectively.
Set forth below is a reconciliation of the non-GAAP financial measure Adjusted Earnings Per Diluted Share to
Loss (earnings) per diluted share, the most directly comparable GAAP measure (in dollars per share) for the
periods indicated.
Years Ended September 30,
2020
2019
$
(Loss) earnings per diluted share
Goodwill impairment
Restructuring and other items
North Charleston and Florence transition and
reconfiguration costs
COVID-19 manufacturing and operations bonus
Losses at closed plants, transition and start-up costs
Accelerated depreciation on major capital projects and
certain plant closures
Interest accretion and other
Loss on extinguishment of debt
Multiemployer pension withdrawal expense (income)
Brazil indirect tax claim
Litigation recovery
Adjustment related to Tax Cuts and Jobs Act
Direct recoveries from Hurricane Michael, net of
related proceeds
Gain on sale of certain closed facilities
Land and Development impairment and operating results (1)
Inventory stepped-up in purchase accounting, net of LIFO
Other
Adjustment to reflect adjusted earnings on a fully diluted basis
Adjusted Earnings Per Diluted Share
$
(1)
Includes a $13.0 million impairment of mineral rights in fiscal 2019.
(2.67) $
5.07
0.33
0.13
0.09
0.07
0.05
0.05
—
—
(0.14)
(0.07)
(0.06)
(0.05)
(0.05)
—
—
0.02
(0.02)
2.75 $
3.33
—
0.56
—
—
0.05
0.12
(0.02)
0.02
(0.01)
(0.02)
—
0.02
(0.03)
(0.15)
0.03
0.07
0.01
—
3.98
51
The GAAP results in the tables below for Pre-Tax, Tax and Net of Tax are equivalent to the line items “(Loss)
income before income taxes”, “Income tax (expense) benefit” and “Consolidated net (loss) income”, respectively,
as reported on the statements of operations. Set forth below are reconciliations of Adjusted Net Income to the most
directly comparable GAAP measure, Net (loss) income attributable to common stockholders (represented in the
table below as the GAAP Results for Consolidated net (loss) income (i.e. Net of Tax) less net income attributable to
Noncontrolling interests), for the periods indicated (in millions):
Year ended September 30, 2020 Year ended September 30, 2019
GAAP Results
Goodwill impairment
Restructuring and other items
North Charleston and Florence transition
and reconfiguration costs
COVID-19 manufacturing and operations
bonus
Losses at closed plants, transition and
start-up costs
Accelerated depreciation on major capital
projects and certain plant closures
Interest accretion and other
Loss on extinguishment of debt
Multiemployer pension withdrawal
expense (income)
Brazil indirect tax claim
Litigation recovery
Adjustment related to Tax Cuts and
Jobs Act
Direct recoveries from Hurricane Michael,
net of related proceeds
Gain on sale of certain closed facilities
Land and Development impairment and
operating results (1)
Inventory stepped-up in purchase
accounting, net of LIFO
Other
Adjusted Results
Noncontrolling interests
Adjusted Net Income
Net of
Tax
Tax
Pre-Tax
$ (522.6) $ (163.5) $ (686.1) $ 1,144.7 $ (276.8) $
—
1,333.2
(28.1)
112.7
(18.9) 1,314.3
84.5
(28.2)
—
173.7
Pre-Tax
Tax
Net of
Tax
867.9
—
145.6
43.4
(10.6)
32.8
31.6
(7.7)
23.9
—
—
—
—
—
—
21.9
(5.4)
16.5
19.7
(5.6)
14.1
17.3
15.0
1.5
0.9
(51.9)
(23.9)
(4.2)
(3.7)
(0.4)
(0.2)
16.0
5.9
13.1
11.3
1.1
0.7
(35.9)
(18.0)
42.1
(5.5)
5.1
(4.6)
(7.3)
—
(10.5)
1.3
(1.3)
1.2
2.1
—
31.6
(4.2)
3.8
(3.4)
(5.2)
—
—
(16.4)
(16.4)
—
4.1
4.1
(16.1)
(15.6)
(1.3)
4.0
3.8
0.3
(12.1)
(11.8)
(10.8)
(52.6)
2.6
12.9
(8.2)
(39.7)
(1.0)
10.5
(2.6)
7.9
—
6.0
—
(1.5)
$ (230.7) $
$
952.1
—
4.5
24.7
3.9
721.4 $ 1,343.6
(4.8)
716.6
$
(6.0)
(1.0)
18.7
2.9
$ (307.7) $ 1,035.9
(5.0)
$ 1,030.9
(1)
Includes a $13.0 million impairment of mineral rights in fiscal 2019.
We discuss certain of these charges in more detail in “Note 4. Restructuring and Other Costs” and “Note 18.
Commitments and Contingencies — Indirect Tax Claim”.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING 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.
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
52
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 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.
ASC 350 allows an optional qualitative assessment, prior to a quantitative assessment test, 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 the quantitative test. As part of the quantitative test, 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. The assumptions we use to estimate future cash flows are
consistent with the assumptions that the reporting units use for internal planning purposes, which we believe would
be generally consistent with that of a market participant. 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 measure goodwill impairment charge
based on the excess of a reporting unit’s carrying amount over its fair value as required under ASU 2017-04,
“Simplifying the Test for Goodwill Impairment”, which we early adopted starting with our fiscal 2020 annual goodwill
impairment test on July 1, 2020. We describe our accounting policy for goodwill further in “Note 1. Description of
Business and Summary of Significant Accounting Policies — Goodwill and Long-Lived Assets” of the
Notes to Consolidated Financial Statements.
We began seeing the impact of COVID-19 in a limited manner at the end of the second quarter of fiscal 2020.
The impact on our operations increased in the third quarter of fiscal 2020. During these interim periods, we
evaluated the current economic environment, including our then current assessment of the long-term impact of
COVID-19 on our forecasts, and we concluded there were no indicators of impairment of our long-lived assets,
including goodwill that required a quantitative test to be performed.
During the fourth quarter of fiscal 2020, we completed our annual goodwill impairment testing. We considered
factors such as, but not limited to, our expectations for the short-term and long-term impacts of COVID-19,
macroeconomic conditions, industry and market considerations, and financial performance, including planned
revenue, earnings and capital investments of each reporting unit. The discount rate used for each reporting unit
ranged from 8.0% to 14.0%. We used perpetual growth rates in the reporting units ranging from 0.5% to 1.0%. All
reporting units that have goodwill were noted to have a fair value that exceeded their carrying values, except the
Consumer Packaging reporting unit. As a result, we recorded a pre-tax non-cash impairment of $1,333.2 million or
$1,314.3 million after-tax. Each of our other reporting units had fair values that exceeded their respective carrying
values by more than 10% each. 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, the fair value of each of our reporting units,
excluding Consumer Packaging, would have continued to exceed its carrying value.
The impairment was driven by the expected lower volumes and cash flows related to certain external SBS end
markets, including commercial print, tobacco and plate and cup stock markets. We have experienced significant
declines in demand for these products and are not showing significant recovery. We believe these declines are
more systemic and our view of related growth and earnings opportunities has been diminished for the foreseeable
future. Worldwide SBS operating rates are down, and the market has taken increased levels of economic
downtime. In October 2020, we announced the shut-down of one of our SBS paper machines at our Evadale, TX
mill, which will result in the removal of 200,000 tons of capacity. At September 30, 2020, following the impairment,
the North American Corrugated, Consumer Packaging, Brazil Corrugated and Victory Packaging reporting units
had $3,533.0 million, $2,288.7 million, $99.4 million and $41.1 million of goodwill, respectively. Our long-lived
assets, including intangible assets remain recoverable. Subsequent to our annual test, we monitored industry
economic trends until the end of our fiscal year and determined no additional testing for goodwill impairment was
53
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, we cannot predict
certain market factors with certainty, including the impact of COVID-19, and have certain risks inherent to our
operations as described in Item 1A. “Risk Factors”. If actual results are not consistent with our assumptions and
estimates, particularly for our Consumer Packaging reporting unit for which the fair value approximates its carrying
value after the impairment recognition, we may be exposed to additional 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
operations. 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 $5.2 million for fiscal 2020. A 1%
change in our effective tax rate used to compute deferred tax liabilities and assets, as recorded on the
September 30, 2020 consolidated balance sheet, would increase or decrease tax expense by approximately $123
million for fiscal 2020.
Pension
The funded status of our qualified and non-qualified U.S. and non-U.S. pension plans increased $137.5 million
in fiscal 2020. Our U.S. qualified and non-qualified pension plans were over funded by $105.2 million as of
September 30, 2020. Our non-U.S. pension plans were under funded by $53.5 million as of September 30, 2020.
Our U.S. pension plan benefit obligations were negatively impacted in fiscal 2020 primarily by a 34-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 2020 by a 26-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 defined herein) as appropriate, would have had the following
effect on fiscal 2020 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
$
$
$
(14.7) $
0.2 $
(15.6) $
25 Basis
Point
Decrease
13.2
(0.2)
15.6
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.
54
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. Our chief executive officer and chief financial officer
must approve the execution of all transactions contemplated in accordance with our Financial and Commodity Risk
Management Corporate Policy. The sensitivity analyses we present below do not consider the effect of possible
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 11.9 million tons in our Corrugated Packaging
segment and approximately 4.0 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 93%. 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 $119 million and $40 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 $773 million on all energy sources in fiscal 2020 to operate our facilities. Natural gas
and electricity each account for approximately 30% to 40% of our energy purchases depending upon pricing. While
the amount of energy we consume my vary from year to year due to production levels and other factors, in fiscal
2021 we expect to consume approximately 88 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 $77 million based on fiscal
2020 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 5.5 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 $55 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
55
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 $137 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. While we experienced higher freight costs in fiscal 2019, freight costs declined in
fiscal 2020. A hypothetical 10% increase for a fiscal year would increase our costs by approximately $161 million,
of which nearly one-eighth to one-fifth would be the portion related to higher diesel costs based on our estimated
83 million gallons consumed annually and pricing. 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, 2020, 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 $13 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, 2020, the effect of a 1% change in exchange rates would impact other income, net by
approximately $3 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,
2020, 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. We currently have no active commodity forward contracts.
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 2020 and 2019, the effect of a 0.25% decrease in the discount rate would have reduced pre-tax
income by approximately $13 million and $10 million, respectively, and a 0.25% increase in the discount rate would
have increased pre-tax income by $15 million and $10 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 — We May Incur Withdrawal Liability and/or Increased Funding
Requirements in Connection with MEPPs”.
56
Foreign Currency
We predominately operate in markets in the U.S., but derived 17.7% of our net sales in fiscal 2020 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 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.
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 2020 and 2019, the effect of a hypothetical 10% change in foreign currencies that we have
exposure to compared to the U.S. dollar would have impacted our segment results by approximately $30 million
and $39 million, respectively. See “Note 7. Segment Information” of the Notes to Consolidated Financial
Statements for additional information.
During fiscal 2020 and 2019, the effect of a hypothetical 1% change in exchange rates would have impacted
accumulated other comprehensive income by approximately $21 million and $31 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 such as a strengthening dollar causes exports to become more
expensive to foreign customers and business that have to pay for them in other currencies. 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”.
57
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Description
Consolidated Statements of Operations
Consolidated Statements of Comprehensive (Loss) Income
Consolidated Balance Sheets
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Income Taxes
Description of Business and Summary of Significant Accounting Policies
Note 1.
Note 2. Revenue Recognition
Note 3. Acquisitions and Investments
Note 4. Restructuring and Other Costs
Note 5. Retirement Plans
Note 6.
Note 7. Segment Information
Interest Expense, Net
Note 8.
Note 9.
Inventories
Note 10. Property, Plant and Equipment
Note 11. Other Intangible Assets
Note 12. Fair Value
Note 13. Debt
Note 14. Selected Condensed Consolidating Financial Statements of Parent, Issuer, Guarantors
and Non-Guarantors
Note 15. Leases
Note 16. Special Purpose Entities
Note 17. Related Party Transactions
Note 18. Commitments and Contingencies
Note 19. Accumulated Other Comprehensive Loss and Other Comprehensive Loss
Note 20. Stockholders’ Equity
Note 21. Share-Based Compensation
Note 22. Earnings Per Share
Note 23. Financial Results by Quarter (Unaudited)
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
59
60
61
62
63
65
65
77
78
81
83
95
99
103
103
103
104
104
106
110
121
123
124
124
128
130
131
135
135
137
140
142
For supplemental quarterly financial information, please see “Note 23. Financial Results by Quarter
(Unaudited)” of the Notes to Consolidated Financial Statements.
58
WESTROCK COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
Net sales
Cost of goods sold
Gross profit
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
Goodwill impairment
Operating (loss) 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
(Loss) income before income taxes
Income tax (expense) benefit
Consolidated net (loss) income
Less: Net income attributable to noncontrolling interests
Net (loss) income attributable to common stockholders
Basic (loss) earnings per share attributable to common
stockholders
Diluted (loss) earnings per share attributable to common
stockholders
Cash dividends paid per share
Year Ended September 30,
2019
2018
2020
$
17,578.8 $
14,381.6
3,197.2
18,289.0 $
14,540.0
3,749.0
16,285.1
12,923.1
3,362.0
1,624.4
400.5
(16.3)
(1.1)
—
112.7
1,333.2
(256.2)
(393.5)
(1.5)
103.3
9.5
15.8
(522.6)
(163.5)
(686.1)
(4.8)
(690.9) $
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
(2.67) $
3.36 $
7.46
(2.67) $
3.33 $
7.34
1.33 $
1.82 $
1.72
$
$
$
$
See Accompanying Notes
59
WESTROCK COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In millions)
Consolidated net (loss) income
Other comprehensive (loss) income, net of tax:
Foreign currency:
Foreign currency translation loss
Derivatives:
Deferred (loss) gain on cash flow hedges
Reclassification adjustment of net loss (gain) 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 gain (loss) arising during period
Amortization and settlement recognition of net
actuarial loss, included in pension and
postretirement cost
Prior service cost arising during period
Amortization and curtailment recognition of prior
service cost, included in pension and
postretirement cost
Other comprehensive (loss) income, net of tax
Comprehensive (loss) income
Less: Comprehensive income attributable to
noncontrolling interests
Comprehensive (loss) income attributable to common
stockholders
Year Ended September 30,
2019
2018
2020
$
(686.1) $
867.9 $
1,909.3
(215.0)
(143.4)
(234.4)
(10.0)
1.1
(0.2)
—
3.6
—
—
—
(1.5)
—
0.5
0.8
24.2
(248.5)
(13.1)
35.4
(19.6)
17.2
(3.3)
15.0
(5.5)
3.8
(177.6)
(863.7)
1.8
(375.3)
492.6
0.2
(238.0)
1,671.3
(4.5)
(3.6)
(3.2)
$
(868.2) $
489.0 $
1,668.1
See Accompanying Notes
60
WESTROCK COMPANY
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable (net of allowances of $66.3 and $53.2)
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 (Note 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;
260.4 million and 257.8 million shares outstanding at September
30, 2020 and September 30, 2019, 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,
2020
2019
$
$
251.1 $
2,142.7
2,023.4
520.5
7.0
4,944.7
10,778.9
5,962.2
3,667.2
1,267.5
368.7
1,790.5
28,779.7 $
$
222.9 $
1,674.2
386.7
645.1
2,928.9
9,207.7
305.2
145.4
1,136.5
2,916.9
1,490.3
1.3
—
2.6
10,916.3
1,031.6
(1,319.9)
10,630.6
16.9
10,647.5
28,779.7 $
$
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
See Accompanying Notes
61
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)
Purchases of common stock (2)
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)
Balance at end of fiscal year
Capital in Excess of Par Value:
Balance at beginning of fiscal year
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 (2)
Balance at end of fiscal year
Retained Earnings:
Balance at beginning of fiscal year
Adoption of accounting standards (3)
Net (loss) income attributable to common stockholders
Dividends declared (per share - $1.33, $1.82 and $1.72) (4)
Issuance of common stock, net of stock received for minimum tax
withholdings
Purchases of common stock (2)
Balance at end of fiscal year
Accumulated Other Comprehensive Loss:
Balance at beginning of fiscal year
Adoption of ASU 2018-02 reclassification of stranded
tax effects resulting from Tax Reform
Other comprehensive loss, net of tax
Balance at end of fiscal year
Total Stockholders’ equity
Noncontrolling Interests: (5)
Balance at beginning of fiscal year
Net income
Contributions
Distributions and adjustments to noncontrolling interests
Balance at end of fiscal year
Total Equity
$
Year Ended September 30,
2019
2018
2020
257.8
0.9
1.7
—
260.4
253.5
3.2
3.2
(2.1)
257.8
$
2.6 $
2.5 $
—
2.6
0.1
2.6
254.5
0.7
1.7
(3.4)
253.5
2.5
—
2.5
10,739.4
130.3
10,588.9
64.8
10,624.9
66.9
46.6
—
—
10,916.3
101.1
70.8
(86.2)
10,739.4
38.9
—
(141.8)
10,588.9
1,997.1
73.5
(690.9)
(348.1)
—
—
1,031.6
1,573.3
43.5
862.9
(479.8)
(0.4)
(2.4)
1,997.1
172.4
—
1,906.1
(445.2)
(6.7)
(53.3)
1,573.3
(1,069.2)
(695.3)
(457.3)
(73.4)
(177.3)
(1,319.9)
10,630.6
14.3
2.7
—
(0.1)
16.9
10,647.5 $
—
(373.9)
(1,069.2)
11,669.9
13.0
3.2
0.2
(2.1)
14.3
11,684.2 $
—
(238.0)
(695.3)
11,469.4
43.6
2.1
0.5
(33.2)
13.0
11,482.4
(1)
(2)
(3)
(4)
(5)
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.
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.
For fiscal 2020, the amount primarily relates to the adoption of ASU 2018-02 (as hereinafter defined). For fiscal 2019, the amount relates
to the adoption of ASC 606 (as hereinafter defined).
Includes cash dividends paid and dividend equivalent units on certain restricted stock awards.
Excludes amounts related to contingently redeemable noncontrolling interests, which are separately classified outside of permanent equity
in the Consolidated Balance Sheets.
See Accompanying Notes
62
WESTROCK COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Operating activities:
Consolidated net (loss) 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
401(k) match in common stock
Pension and other postretirement funding more than expense
(income)
Multiemployer pension withdrawal (income) expense
Land and Development impairments
Goodwill impairment
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 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 to revolving credit facilities
Repayments of revolving credit facilities
Additions to debt
Repayments of debt
Changes in commercial paper, net
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
Other
Net cash (used for) provided by 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
2020
Year Ended September 30,
2019
2018
$
(686.1) $
867.9 $
1,909.3
1,487.0
16.1
43.0
130.3
20.8
(80.1)
(1.1)
—
1,333.2
25.8
(13.2)
(39.3)
30.5
21.8
(202.4)
(86.4)
(27.6)
98.4
2,070.7
(978.1)
—
—
(1.3)
35.0
6.5
16.4
(921.5)
598.6
428.0
(528.2)
696.4
(1,449.2)
(339.2)
(80.3)
22.2
—
(344.5)
(2.4)
(22.5)
(1,021.1)
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
222.2
(227.2)
5,061.6
(5,631.6)
339.2
52.2
18.3
(88.6)
(467.9)
(4.3)
8.1
1,780.2
(28.6)
99.5
151.6
251.1 $
4.0
(485.2)
636.8
151.6 $
$
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
702.4
(572.2)
855.2
(2,032.9)
—
(269.9)
26.6
(195.1)
(440.9)
(33.3)
7.7
(755.1)
(28.2)
332.8
304.0
636.8
63
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,
2019
2018
2020
$
$
147.2
395.4
$
$
226.1
412.5
$
$
60.5
284.4
The adoption of ASC 842, Leases, resulted in recognition of non-cash right-of-use (“ROU”) assets and non-
cash operating lease liabilities. See “Note 15. Leases” for more information on the impact of this adoption.
Supplemental schedule of non-cash investing and financing activities:
(In millions)
Non-cash investing activities:
Year Ended September 30,
2019
2018
2020
Deferred purchase price of trade receivables sold
$
—
$
—
$
436.7
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 (each as hereinafter
defined). See “Note 3. Acquisitions and Investments” for additional information.
(In millions)
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
See Accompanying Notes
Year Ended September 30,
2018
2019
$
$
5,948.9 $
(3,369.3)
(70.1)
(70.8)
16.6
2,455.3 $
303.2
(242.1)
—
—
(25.0)
36.1
64
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 sustainable fiber-based paper and packaging. 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.
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 Investments” for additional information.
Basis of Presentation and Principles of Consolidation
The consolidated financial statements are prepared in accordance with GAAP and, in certain cases, include
amounts based on management's prudent judgments and estimates. Actual results may differ from these
estimates.
The consolidated financial statements include the accounts of WestRock and our partially owned subsidiaries
for which we have a controlling financial interest, including variable interest entities for which we are the primary
beneficiary. 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 without a readily determinable value in which
we are not able to exercise significant influence over the investee are accounted under the measurement
alternative (i.e. cost less impairment, adjusted for any qualifying observable price changes). Our equity and cost
method investments are not material 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 and Adjustments
During fiscal 2020, we evaluated our revolving credit facilities and determined that the borrowings and
repayments for certain facilities should be presented gross instead of net on the consolidated statements of cash
flow and corrected the presentation of the prior years by an immaterial amount. Certain amounts in prior periods
have been reclassified to conform with the current year presentation.
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
65
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
obligations, restructuring activities and estimating the fair value of assets and liabilities of acquired businesses. 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. The global impact of the COVID-19 pandemic may also affect our accounting estimates,
which may materially change from period to period due to changing market factors. 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, which coincide with the transfer of control of our goods to the
customer. 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 ASC 606 “Revenue from Contracts with Customers” (“ASC 606”).
As permitted by ASC 606, we have elected to 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. We also
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.
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.
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 of our 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 (as hereinafter defined). See “Note 12. Fair Value — Accounts Receivable Sales Agreement”.
66
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 charge off
receivables when they are determined to be no longer collectible. Bad debt expense was $19.9 million, $10.0
million and $4.2 million in fiscal 2020, 2019 and 2018, respectively.
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 2020, 2019 and 2018 (in millions):
Balance at beginning of fiscal year
Reduction in sales and charges to costs and expenses
Deductions
Balance at end of fiscal year
2020
2019
2018
$
$
53.2 $
270.8
(257.7)
66.3 $
49.7 $
259.6
(256.1)
53.2 $
45.8
202.8
(198.9)
49.7
Inventories
We value our U.S. inventories at the lower of cost or market, with cost for the majority of our U.S. inventories
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 41% and 39% of FIFO cost of all inventory at September 30, 2020 and 2019, 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.
Leased Assets
We adopted the provisions of ASC 842 on October 1, 2019 using the modified retrospective approach and, as
a result, did not restate prior periods. See “Note 15. Leases” for additional details. We lease various real estate,
including certain operating facilities, warehouses, office space and land. We also lease material handling
equipment, vehicles and certain other equipment. We record our operating lease ROU assets and liabilities at the
commencement date of the lease based on the present value of lease payments over the lease term.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our
obligation to make lease payments arising from the lease. Our leases may include options to extend or terminate
the lease. These options to extend are included in the lease term when it is reasonably certain that we will exercise
that option. While some leases provide for variable payments, they are not included in the ROU assets and
liabilities because they are not based on an index or rate. Variable payments for real estate leases primarily relate
to common area maintenance, insurance, taxes and utilities. Variable payments for equipment, vehicles and
leases within supply agreements primarily relate to usage, repairs, and maintenance. As the implicit rate is not
readily determinable for our leases, we apply a portfolio approach using an estimated incremental borrowing rate
to determine the initial present value of lease payments over the lease terms on a collateralized basis over a
similar term, which is based on market and company specific information. We use the unsecured borrowing rate
and risk-adjust that rate to approximate a collateralized rate, and apply the rate based on the currency of the lease,
which is updated on a quarterly basis for measurement of new lease liabilities.
67
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We have made an accounting policy election to not recognize ROU 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. In addition, the Company has applied the practical expedient to account for the
lease and non-lease components as a single lease component for all of the Company's leases. See “Note 15.
Leases” for additional information.
Property, Plant and Equipment
We record 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 2020, 2019 and 2018,
we capitalized interest of approximately $24.6 million, $23.8 million and $8.2 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 from a market participant perspective. 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.
ASC 350 allows an optional qualitative assessment, prior to a quantitative assessment test, 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 the quantitative test. As part of the quantitative test, 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 past 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, which we believe would
be generally consistent with that of a market participant. 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
68
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
determined by the discounted cash flow and guideline public company methods are weighted to arrive at the
concluded fair value of the reporting unit. However, in instances where comparisons to our peers is less
meaningful, no weight is 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 measure goodwill impairment charge based on the excess of a reporting unit’s carrying
amount over its fair value as required under ASU 2017-04, which we early adopted starting with our fiscal 2020
annual goodwill impairment test on July 1, 2020.
We began seeing the impact of COVID-19 in a limited manner at the end of the second quarter of fiscal 2020.
The impact on our operations increased in the third quarter of fiscal 2020. During these interim periods, we
evaluated the current economic environment, including our then current assessment of the long-term impact of
COVID-19 on our forecasts, and we concluded there were no indicators of impairment of our long-lived assets,
including goodwill that required a quantitative test to be performed.
During the fourth quarter of fiscal 2020, we completed our annual goodwill impairment testing. We considered
factors such as, but not limited to, our expectations for the short-term and long-term impacts of COVID-19,
macroeconomic conditions, industry and market considerations, and financial performance, including planned
revenue, earnings and capital investments of each reporting unit. The discount rate used for each reporting unit
ranged from 8.0% to 14.0%. We used perpetual growth rates in the reporting units that have goodwill ranging from
0.5% to 1.0%. All reporting units that have goodwill were noted to have a fair value that exceeded their carrying
values, except the Consumer Packaging reporting unit. As a result, we recorded a pre-tax non-cash impairment of
$1,333.2 million or $1,314.3 million after-tax. Each of our other reporting units had fair values that exceeded their
respective carrying values by more than 10% each. 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 the fair value of each of
our reporting units, excluding Consumer Packaging, would have continued to exceed its carrying value.
The impairment was driven by the expected lower volumes and cash flows related to certain external SBS end
markets, including commercial print, tobacco and plate and cup stock markets. We have experienced significant
declines in demand for these products and are not showing significant recovery. We believe these declines are
more systemic and our view of related growth and earnings opportunities has been diminished for the foreseeable
future. Worldwide SBS operating rates are down, and the market has taken increased levels of economic
downtime. In October 2020, we announced the shut-down of one of our SBS paper machines at our Evadale, TX
mill which results in the removal of 200,000 tons of capacity. At September 30, 2020, following the impairment, the
North American Corrugated, Consumer Packaging, Brazil Corrugated and Victory Packaging reporting units had
$3,533.0 million, $2,288.7 million, $99.4 million and $41.1 million of goodwill, respectively, at September 30, 2020.
Our long-lived assets, including intangible assets remain recoverable. Subsequent to our annual test, we
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, we cannot predict certain market factors with certainty, including the impact of COVID-19, and have
certain risks inherent to our operations as described in Item 1A. “Risk Factors”. If actual results are not consistent
with our assumptions and estimates, particularly for our Consumer Packaging reporting unit for which the fair value
approximates its carrying value after the impairment recognition, we may be exposed to additional 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 15.5 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, contractual obligations, and
the adjustments of property, plant and equipment and lease ROU assets to their fair 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 equity method investments when they are deemed to be other-than-temporarily
impaired, investments for which the fair value measurement alternative is elected, assets acquired and liabilities
assumed 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, property, plant and equipment, ROU assets related to
operating leases, goodwill and other 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. Given the nature of nonfinancial assets and liabilities, evaluating their fair value from the
perspective of a market participant is inherently complex. 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, 2020, the notional amounts of interest rate and foreign currency exchange contract
derivatives were $600.0 million and $250.2 million, respectively. The fair value of these derivative instruments was
not significant as of September 30, 2020. At September 30, 2020, no natural gas commodity derivatives were
outstanding. 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. 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
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.
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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
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. 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. Forfeitures are estimated based on historical experience. In fiscal 2020, in connection with our
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
WestRock Pandemic Action Plan we issued restricted stock grants to the majority of our employees to replace their
annual cash bonus. 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 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, 2020 and
September 30, 2019, we had recorded liabilities of $72.3 million and $72.5 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, 2020 and 2019 were $118.2 million and $124.3 million, respectively. The assets
are recorded as other assets on the consolidated balance sheets.
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 operations. We
recorded a gain on foreign currency transactions of $6.6 million, $18.5 million and $12.2 million in fiscal 2020, 2019
and 2018, 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 — Adopted in fiscal 2020
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment”, which
amends the guidance in ASC 350, “Intangibles Goodwill and Other”. The ASU eliminates the requirement to
calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an
impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The ASU is
effective for annual and interim impairment tests performed for fiscal years beginning after December 15, 2019
(fiscal 2021 for us). Early adoption is permitted for annual and interim goodwill impairment testing dates after
January 1, 2017. The ASU is applied prospectively after adoption. We early adopted the provisions of this ASU
starting with our fiscal 2020 annual goodwill impairment test on July 1, 2020. See the results of our fiscal 2020
annual goodwill impairment test within “Note 1. Description of Business and Summary of Significant
Accounting Policies — Goodwill and Long-Lived Assets”.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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” (“ASU 2018-
02”). 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. We adopted the provisions of this ASU on October 1, 2019. Upon
adoption, we elected to reclassify stranded tax effects of the Tax Act within accumulated other comprehensive
income to retained earnings. The reclassification of stranded tax effects from accumulated other comprehensive
income increased retained earnings by $73.4 million, all of which related to our employee benefit plans.
In February 2016, the FASB issued ASU 2016-02 “Leases”, which is codified in ASC 842 and supersedes
current lease guidance in ASC 840 “Leases”. This ASU requires lessees to put a ROU 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 need to disclose
qualitative and quantitative information about their leases, including characteristics and amounts recognized in the
financial statements. We adopted the provisions of ASC 842 on October 1, 2019 using the modified retrospective
approach and, as a result, did not restate prior periods. See “Note 15. Leases” for additional details.
New Accounting Standards — Pending to be Adopted in Fiscal 2021
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 is effective for
fiscal years beginning after December 15, 2019 (fiscal 2021 for us) and interim periods within those fiscal years.
Early adoption is permitted. We do not expect the adoption of this ASU to have a material impact on our
consolidated financial statements.
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 beginning after
December 15, 2019 (fiscal 2021 for us) and interim periods within those fiscal years. Early adoption is permitted.
We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.
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 beginning after December 15, 2019 (fiscal 2021 for us), and interim periods
within those fiscal years. Early adoption is permitted. We are planning to adopt the provisions of this ASU
prospectively and do not expect the adoption of this ASU to have a material impact on our consolidated financial
statements.
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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 (fiscal 2021 for us).
Early adoption is permitted. We do not expect the adoption of this ASU to have a material impact on our
consolidated financial statements.
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
(fiscal 2021 for us), 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 “Codification Improvements to Topic 326, Financial Instruments –
Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” (“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. In November 2019, the FASB issued ASU 2019-11 “Codification Improvements to Topic 326, Financial
Instruments – Credit Losses” (“ASU 2019-11”), which makes certain narrow-scope amendments to Topic 326,
including allowing entities to exclude accrued interest amounts from various required disclosures under Topic 326.
In February 2020, the FASB issued ASU 2020-02 “Financial Instruments – Credit Losses (Topic 326) and Leases
(Topic 842)” (“ASU 2020-02”), which adds and amends paragraphs in the Accounting Standards Codification to
reflect the issuance of SEC Staff Accounting Bulletin No. 119 primarily related to the new credit losses standard.
The provisions of ASU 2019-04, ASU 2019-05, ASU 2019-11 and ASU 2020-02 related to Topic 326 are effective
concurrent with the adoption of ASU 2016-13. We have substantially completed the implementation activities for
the adoption of these ASUs and do not expect to have a material impact on our consolidated financial statements.
New Accounting Standards — Recently Issued
In March 2020, the FASB issued ASU 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects
of Reference Rate Reform on Financial Reporting”. This ASU provides temporary optional expedients and
exceptions for applying GAAP guidance on contract modifications and hedge accounting to ease the financial
reporting burdens of the expected market transition from the LIBOR and other interbank offered rates to alternative
reference rates, such as the Secured Overnight Financing Rate. The ASU can be adopted after its issuance date
through December 31, 2022. We are currently evaluating the impact of this ASU.
In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes”. This ASU simplifies the accounting for income taxes by removing certain exceptions to the general
principles in Topic 740 under GAAP. This ASU also improves consistent application of and simplifies GAAP for
other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years
beginning after December 15, 2020 (fiscal 2022 for us) and interim periods within those fiscal years. Early adoption
is permitted. We are currently evaluating the impact of this ASU.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 2.
Revenue Recognition
Disaggregated Revenue
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 tables
below disaggregate our revenue by geographical market and product type (segment). Net sales are attributed to
geographical markets based on our selling location.
(In millions)
Primary Geographical Markets
North America
South America
Europe
Asia Pacific
Corrugated
Packaging
$ 10,975.8 $
393.1
7.9
42.4
Total
$ 11,419.2 $
(In millions)
Primary Geographical Markets
North America
South America
Europe
Asia Pacific
Corrugated
Packaging
$ 11,314.7 $
437.2
1.6
63.2
Total
$ 11,816.7 $
Revenue Contract Balances
Year Ended September 30, 2020
Land and
Development
Consumer
Packaging
Intersegment
Sales
Total
4,978.2 $
70.1
1,006.4
278.3
6,333.0 $
18.9 $
—
—
—
18.9 $
(191.4) $ 15,781.5
463.2
1,014.0
320.1
(192.3) $ 17,578.8
—
(0.3)
(0.6)
Year Ended September 30, 2019
Land and
Development
Consumer
Packaging
Intersegment
Sales
Total
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)
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 the control
of the goods 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 reported within Other current assets and Other current liabilities, respectively, on the
consolidated balance sheet.
(In millions)
Beginning balance - October 1, 2019
Ending balance - September 30, 2020
(Decrease) / increase
Performance Obligations and Significant Judgments
Contract Assets
(Short-Term)
Contract Liabilities
(Short-Term)
$
$
188.0
185.8
(2.2)
$
$
7.7
12.0
4.3
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
77
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
Note 3.
Acquisitions and Investments
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 2020 to our fiscal 2019 provisional fair value estimates of assets and liabilities assumed in
acquisitions were significant. The measurement periods for all prior acquisitions are closed.
KapStone Acquisition
On November 2, 2018, we completed the KapStone Acquisition. 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
78
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the remaining service period of the awards. See “Note 21. Share-Based Compensation” for additional
information on the converted awards.
The following table summarizes the fair values of the assets acquired and liabilities assumed in the KapStone
Acquisition by major class of assets and liabilities as of the acquisition date, as well as adjustments made during
fiscal 2019 and fiscal 2020 (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
$
$
—
(30.2)
11.5
0.5
30.3
(0.1)
12.0
—
7.9
—
2.8
(1.4)
2.7
12.0
—
Amounts
Recognized as of
Acquisition Date
(as Adjusted) (2)
8.6
$
848.7
1,921.8
1,755.5
1,366.4
27.8
5,928.8
33.3
345.4
1,333.4
12.6
608.3
121.1
2,454.1
3,474.7
$
(1) The measurement period adjustments recorded in fiscal 2019 and fiscal 2020 did not have a significant impact on our
consolidated statements of operations in any period.
(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 to goodwill were essentially flat.
The fair value assigned to goodwill is primarily attributable to buyer-specific synergies expected to arise after
the KapStone 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 are not 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, except lives):
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
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.
79
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Schlüter Acquisition
On September 4, 2018, we completed the acquisition of Schlüter Print Pharma Packaging (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 acquisition (the “Plymouth Packaging Acquisition”) of substantially
all of the assets of Plymouth Packaging, Inc. (“Plymouth”) 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. On October 20, 2017, we increased our ownership interest in Grupo Gondi in
Mexico (the “Joint Venture”) 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.
In connection with the investment in the Joint Venture, we entered into an option agreement pursuant to which
we and certain other shareholders of the Joint Venture (the “Partners”) agreed to future put and call options with
respect to the equity interests in the Joint Venture held by each party. Pursuant to the option agreement, the
Partners had the right on April 1, 2020 to sell us up to 24% of the equity interest in the Joint Venture at fair market
value. The Partners did not exercise this right. Pursuant to the option agreement, between October 1, 2020 and
April 1, 2021, we may exercise a right to purchase an additional 18.7% equity interest in the Joint Venture from the
Partners at a predetermined purchase price. If we exercise our right to purchase the additional 18.7% equity
80
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
interest, the Partners may elect to sell us the Partners’ 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.
Note 4.
Restructuring and Other Costs
Summary of Restructuring and Other Initiatives
We recorded pre-tax restructuring and other costs of $112.7 million, $173.7 million and $105.4 million for fiscal
2020, 2019 and 2018, respectively. Of these costs, $29.8 million, $56.5 million and $27.0 million were non-cash for
fiscal 2020, 2019 and 2018, 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 2020, 2019 and 2018 (in millions):
Restructuring
Other
Restructuring and Other Costs
Restructuring
2020
2019
2018
$
$
93.7 $
19.0
112.7 $
111.0 $
62.7
173.7 $
39.5
65.9
105.4
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
voluntary retirement programs in fiscal 2019 and 2020. A partial plant closure may consist of shutting down a
machine and/or a workforce reduction. In fiscal 2020, our restructuring charges include those associated with
reducing the capacity of our Consumer mill system with the announced shutdown of an SBS machine at our
Evadale, TX mill. In fiscal 2019, charges include those associated with reducing the linerboard capacity of our
Corrugated mill system related to the announced shutdown of a machine at our North Charleston, SC mill. In
addition, in fiscal 2019, we began recording charges in our Corrugated Packaging segment associated with the
replacement of three paper machines at our Florence, SC mill with a new one.
When we close a facility, if necessary, we recognize a write-down to reduce the carrying value of related
property, plant and equipment and lease ROU assets to their fair value and record charges for severance and
other employee-related costs. We reduce the carrying value of the assets classified as held for sale to their
estimated fair value less cost to sell. Any subsequent change in fair value less cost to sell prior to disposition is
recognized as it is identified; however, no gain is recognized in excess of the cumulative loss previously recorded
unless the actual selling price exceeds the original carrying value. For plant closures, we also generally expect to
record costs for equipment relocation, facility carrying costs and costs to terminate a lease or contract before the
end of its term.
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 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
Restructuring total
Land and Development
Net property, plant and equipment costs
Severance and other employee costs
Other costs
Restructuring total
Corporate
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
2020
2019
2018
Cumulative
Total
Expected
$
$
$
$
$
$
$
$
$
$
2.2 $
8.7
2.2
2.6
(1.9)
13.8 $
23.5 $
19.8
1.4
—
10.5
55.2 $
— $
—
2.0
2.0 $
21.1 $
1.6
22.7 $
25.7 $
49.6
3.6
2.6
12.2
93.7 $
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 $
32.6 $
60.5
5.8
4.1
8.0
111.0 $
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 $
9.7 $
9.9
5.8
4.2
9.9
39.5 $
96.3 $
43.2
10.4
21.1
3.3
174.3 $
53.1 $
58.3
7.3
1.9
19.1
139.7 $
1.8 $
13.8
5.0
20.6 $
59.4 $
9.0
68.4 $
151.2 $
174.7
17.7
23.0
36.4
403.0 $
96.3
43.2
10.9
23.2
3.3
176.9
53.1
58.3
7.3
1.9
19.4
140.0
1.8
13.8
5.0
20.6
59.4
9.0
68.4
151.2
174.7
18.2
25.1
36.7
405.9
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. We consider acquisition,
integration and divestiture costs to be Corporate costs regardless of the segment or segments involved in the
transaction.
82
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents our acquisition, integration and divestiture costs that we incurred during the last
three fiscal years (in millions):
Acquisition costs
Integration costs
Divestiture costs
Other total
2020
2019
2018
$
$
0.2 $
18.7
0.1
19.0 $
28.2 $
34.3
0.2
62.7 $
38.2
27.4
0.3
65.9
The following table summarizes the changes in the restructuring accrual, which is primarily composed of
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
Additional accruals
Payments
Adjustment to accruals
Foreign currency rate changes and other
Accrual at end of fiscal year
2020
2019
2018
$
$
32.3 $
51.3
(56.6)
(6.2)
(3.6)
17.2 $
31.6 $
60.0
(55.9)
(3.2)
(0.2)
32.3 $
47.4
16.5
(29.8)
(1.0)
(1.5)
31.6
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 (1)
Total restructuring and other costs, net
2020
2019
2018
$
$
45.1 $
0.2
18.7
0.1
25.7
1.6
3.6
2.6
15.1
112.7 $
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
(1)
Other costs primarily includes lease and contract termination costs.
Note 5.
Retirement Plans
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,
and nearly all of our remaining salaried and non-union hourly employees accruing benefits will cease accruing
benefits as of December 31, 2020. 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.
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
83
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 materially 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.
Our target asset allocations by asset category at September 30 were as follows:
Equity investments
Fixed income investments
Short-term investments
Other investments
Total
Pension Plans
2020
2019
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
19%
75%
1%
5%
100%
20%
72%
2%
6%
100%
15%
75%
1%
9%
100%
20%
72%
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
Pension Plans
2020
2019
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
22%
72%
3%
3%
100%
21%
72%
2%
5%
100%
13%
70%
9%
8%
100%
22%
71%
2%
5%
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 $23 million to our
U.S. and non-U.S. pension plans in fiscal 2021. 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 or adjustments to
those accruals.
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
2020
2019
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
3.01%
2.50%
2.16%
2.68%
3.35%
3.00%
2.42%
2.65%
At September 30, 2020, 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, 2020 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 2021, our expected rate of return used to
determine net periodic benefit cost is 6.00% for our U.S. plans and 3.73% for our non-U.S. plans. Our expected
rates of return in fiscal 2021 are based on an analysis of our long-term expected rate of return and our current
asset allocation.
In December 2019, the USW ratified a new master agreement that applies to substantially all of our U.S.
facilities represented by the USW. The agreement has a four-year term and covers a number of specific items,
including wages, medical coverage and certain other benefit programs, substance abuse testing, and safety.
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. The master agreement permits us to apply its terms to
USW employees who work at facilities we acquire during the term of the agreement, including most former
MeadWestvaco Corporation, KapStone and other acquired facilities.
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
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 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
Over (under) funded status at end of fiscal year
Pension Plans
2020
2019
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
$
$
$
$
$
$
$
5,048.9 $
44.2
165.0
25.2
214.3
—
(233.1)
—
—
—
—
5,264.5 $
5,005.3 $
582.6
14.9
—
(233.1)
—
—
—
5,369.7 $
105.2 $
1,443.1 $
8.4
33.6
(0.2)
41.9
2.0
(72.0)
—
3.2
(9.0)
20.5
1,471.5 $
1,400.9 $
65.4
7.6
2.0
(72.0)
—
(9.0)
23.1
1,418.0 $
(53.5) $
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)
290.6 $
(10.7)
(174.7)
105.2 $
78.1 $
(1.1)
(130.5)
(53.5) $
143.3 $
(14.6)
(172.3)
(43.6) $
81.4
(1.9)
(121.7)
(42.2)
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 $222.3 million, aggregate accumulated benefit
obligations of $222.2 million, and aggregate fair value of plan assets of $36.8 million at September 30, 2020. Our
qualified U.S. plans were in a net overfunded position at September 30, 2020.
The accumulated benefit obligation of U.S. and non-U.S. pension plans was $6,682.2 million and $6,438.9
million at September 30, 2020 and 2019, 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
2020
2019
Net actuarial loss
Prior service cost
Total accumulated other comprehensive loss
U.S. Plans
$
753.2 $
45.6
798.8 $
$
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
188.6 $
2.4
191.0 $
854.7 $
27.6
882.3 $
168.8
3.4
172.2
The pre-tax amounts recognized in other comprehensive loss (income), including noncontrolling interest, are
as follows at September 30 (in millions):
Net actuarial (gain) loss 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 (income) loss recognized
$
$
(26.2) $
(48.2)
25.0
(7.8)
(57.2) $
312.0 $
(25.3)
3.5
(5.2)
285.0 $
38.7
(20.6)
9.3
(4.7)
22.7
2020
Pension Plans
2019
2018
The net periodic pension (income) cost recognized in the consolidated statements of operations 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 loss (gain)
Company defined benefit plan (income) cost
Multiemployer and other plans
Net pension (income) cost
2020
Pension Plans
2019
2018
$
$
52.6 $
198.6
(362.3)
46.8
7.5
0.4
1.4
(55.0)
2.0
(53.0) $
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)
The Multiemployer and other plans line in the table above excludes the estimated withdrawal liabilities
recorded. See “Note 5. Retirement Plans — Multiemployer Plans” for additional information.
The Consolidated Statements of Operations line item “Pension and other postretirement non-service income”
is equal to the non-service elements of our “Company defined benefit plan (income) cost” and our “Net
postretirement cost” outlined in this note.
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
2020
Pension Plans
2019
2018
U.S.
Plans
Non-U.S.
Plans
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%
4.09%
3.00%
3.26%
2.65%
6.25%
4.26%
6.50%
4.69%
6.50%
4.98%
For our U.S. pension and postretirement plans, we considered the mortality tables and improvement scales
published by the Society of Actuaries (“SOA”) and evaluated our specific mortality experience to establish mortality
assumptions. Based on our experience and in consultation with our actuaries, for fiscal 2020 and 2019 we utilized
the base Pri-2012 mortality tables with specific gender and job classification increases applied for fiscal 2020
ranging from 5% to 12% and for fiscal 2019 6% to 12%. For fiscal 2018, we utilized the SOA’s base RP-2014
mortality tables with increases ranging from 10% to 14%.
For our Canadian pension and postretirement plans, we utilized the 2014 Private Sector Canadian Pensioners
Mortality Table adjusted to reflect industry and our mortality experience for fiscal 2020, 2019 and 2018. As of
September 30, 2020, these adjustment factors were updated to reflect the most recent mortality experience.
The estimated losses that will be amortized from accumulated other comprehensive loss into net periodic
benefit cost in fiscal 2021 are as follows (in millions):
Pension Plans
Actuarial loss
Prior service cost
Total
$
$
U.S. Plans
Non-U.S. Plans
10.4
0.2
10.6
20.9 $
7.8
28.7 $
Our projected estimated benefit payments (unaudited), which reflect expected future service, as appropriate,
are as follows (in millions):
Pension Plans
U.S. Plans
Non-U.S. Plans
71.9
71.5
71.7
71.0
71.3
350.0
264.6 $
273.5 $
277.6 $
282.0 $
278.0 $
1,422.0 $
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal Years 2026 – 2030
$
$
$
$
$
$
88
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, 2020 (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:
$
253.0 $
4.0
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
$
$
331.7
103.1
2,875.3
540.7
388.0
168.7
4,664.5 $
2,123.2
6,787.7
253.0 $
4.0
—
—
124.9
—
—
168.7
550.6 $
—
—
331.7
103.1
2,750.4
540.7
388.0
—
4,113.9
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
(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.
(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.
89
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(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, 2020 and 2019 (in millions):
September 30, 2020
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, 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)
Fair value
Redemption
Frequency
Redemption
Notice Period
Unfunded
Commitments
$
39.2 Monthly
Up to 30 days $
—
1,416.9 Monthly
Up to 60 days
228.9
667.1 Monthly
$
2,123.2
Up to 10 days
$
—
228.9
$
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
(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.
(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.
(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.
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.
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.
90
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
2020
2019
U.S.
Plans
Non-
U.S. Plans
U.S.
Plans
Non-
U.S. Plans
3.00%
4.84%
3.34%
5.64%
The following table shows the changes in benefit obligation, plan assets and funded status for the fiscal years
ended September 30 (in millions):
Postretirement Plans
2020
2019
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
98.3 $
0.6
3.2
(0.1)
(3.1)
(5.3)
—
—
93.6 $
— $
5.3
(5.3)
— $
(93.6) $
75.7 $
0.7
3.7
2.0
(5.3)
(2.9)
—
(11.4)
62.5 $
91.0 $
0.7
4.1
0.4
1.6
(6.6)
7.1
—
98.3 $
— $
2.9
(2.9)
— $
(62.5) $
— $
6.6
(6.6)
— $
(98.3) $
(8.0) $
(85.6)
(93.6) $
(2.7) $
(59.8)
(62.5) $
(8.9) $
(89.4)
(98.3) $
55.5
0.5
3.6
—
22.2
(2.9)
—
(3.2)
75.7
—
2.9
(2.9)
—
(75.7)
(3.0)
(72.7)
(75.7)
Change in projected benefit obligation:
Benefit obligation at beginning of fiscal year
Service cost
Interest cost
Amendments
Actuarial (gain) loss
Benefits paid
Business combinations
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
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
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
2020
2019
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
Net actuarial (gain) loss
Prior service (credit) cost
Total accumulated other comprehensive (income) loss
$
$
(10.6) $
(5.7)
(16.3) $
13.0 $
1.2
14.2 $
(8.0) $
(8.3)
(16.3) $
18.8
(0.9)
17.9
The pre-tax amounts recognized in other comprehensive loss (income), including noncontrolling interest, are
as follows at September 30 (in millions):
Net actuarial (gain) loss arising during period
Amortization and settlement recognition of net actuarial
(loss) gain
Prior service cost (credit) arising during period
Amortization or curtailment recognition of prior service credit
Net other comprehensive (income) loss recognized
$
(0.1)
1.9
2.7
(3.9) $
2.0
0.4
2.8
29.1 $
Postretirement Plans
2019
2018
2020
$
(8.4) $
23.9 $
(9.7)
(0.3)
(1.5)
4.4
(7.1)
The net periodic postretirement cost recognized in the consolidated statements of operations is comprised of
the following for fiscal years ended (in millions):
Service cost
Interest cost
Amortization of net actuarial loss (gain)
Amortization of prior service credit
Curtailment gain
Net postretirement cost
Postretirement Plans
2019
2018
2020
$
$
1.3 $
6.9
0.1
(2.7)
—
5.6 $
1.2 $
7.7
(2.0)
(2.8)
—
4.1 $
1.5
7.9
0.3
(4.4)
(0.1)
5.2
The assumed health care cost trend rates used in measuring the accumulated postretirement benefit
obligation (“APBO”) are as follows at September 30, 2020:
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
5.57%
4.42%
2038
5.25%
5.25%
2020
As of September 30, 2020, the effect of a 1% change in the assumed health care cost trend rate would
increase the APBO by approximately $10 million or decrease the APBO by approximately $8 million, and would
92
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
increase the annual net periodic postretirement benefit cost for fiscal 2020 by $1 million or decrease the annual net
periodic postretirement benefit cost for fiscal 2020 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
2020
Postretirement Plans
2019
2018
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
3.34%
N/A
5.64%
N/A
4.50%
N/A
6.61%
N/A
4.09%
N/A
6.51%
7.37%
The estimated gains that will be amortized from accumulated other comprehensive loss into net periodic
benefit cost in fiscal 2021 are as follows (in millions):
Postretirement Plans
Actuarial (gain) loss
Prior service (credit) cost
Total
$
$
U.S. Plans
Non-U.S. Plans
0.1
0.1
0.2
(1.3) $
(2.5)
(3.8) $
Our projected estimated benefit payments (unaudited), which reflect expected future service, as appropriate,
are as follows (in millions):
Postretirement Plans
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal Years 2026 – 2030
Multiemployer Plans
$
$
$
$
$
$
U.S. Plans
Non-U.S. Plans
2.7
2.7
2.8
2.9
3.0
16.7
8.6 $
7.6 $
7.2 $
6.9 $
6.6 $
29.2 $
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 (i) assets contributed to a MEPP by one employer are used to provide
benefits to employees of all participating employers, (ii) 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 (iii) 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. Contributions to MEPPs are individually and in the aggregate not significant.
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
Central States, and recorded estimated withdrawal liabilities for each. We recorded an estimated withdrawal
liability of $180.0 million for PIUMPF. The estimated withdrawal liability assumed 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 was not considered probable or reasonably estimable. In fiscal
2019 and 2020, we continued to refine the estimate of the withdrawal liability, the impact of which was not
93
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 initial 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 of ours 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 received an updated demand letter
decreasing the accumulated funding deficiency demand from $2.0 million to $1.3 million in April 2020. In February
2020, we received a demand letter from PIUMPF asserting that we owe $51.2 million for our pro-rata share of
PIUMPF’s accumulated funding deficiency, including interest. We are evaluating each of these demands and we
expect to challenge the accumulated funding deficiency demands. We began making monthly payments for these
withdrawal liabilities in fiscal 2020, excluding the accumulated funding deficiency demands.
At September 30, 2020 and September 30, 2019, we had withdrawal liabilities recorded of $252.0 million and
$237.2 million, respectively. The increase in the withdrawal liabilities in fiscal 2020 was primarily due to the
decrease in interest rates. 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 56% of our employees are covered by CBAs in the U.S. and Canada, of which approximately
21% are covered by CBAs that expire within one year and another 15% are covered by CBAs that have expired.
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, 2020, 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 2020, 2019 and 2018, we recorded expense of $150.1 million, $150.9 million and
$113.7 million, respectively, related to employer contributions to the 401(k) plans and other defined contribution
plans, including the automatic employer contribution. In connection with the WestRock Pandemic Action Plan, we
began funding our matching contributions in Common Stock effective July 1, 2020 to the WestRock Company
401(k) Retirement Savings Plan.
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, 2020, the
Supplemental Plans had assets totaling $168.9 million that are recorded at market value, and liabilities of $176.1
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.
94
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 6.
Income Taxes
The components of (loss) income before income taxes are as follows (in millions):
United States
Foreign
Income before income taxes
Impacts of the Tax Act
Year Ended September 30,
2019
2018
2020
$
$
(440.7) $
(81.9)
(522.6) $
891.6 $
253.1
1,144.7 $
736.7
298.1
1,034.8
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. During the third quarter
of fiscal 2020, we reduced our transition tax reserve by $16.4 million based on adjustments to expected post-1986
deferred foreign income as of the transition tax date.
Beginning in fiscal 2019, we were 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 FDII in our effective tax rate for fiscal 2020. For the BEAT computation, we did not record
any amount in our effective tax rate for fiscal 2020 because this provision of the Tax Act did 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,
2019
2018
2020
$
$
31.6 $
23.5
66.8
121.9
42.4
6.2
(7.0)
41.6
163.5 $
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)
95
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 (2)
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
Change in valuation allowance
Nondeductible transaction costs
Goodwill impairment
Nontaxable increased cash surrender value
Withholding taxes
Brazilian net worth deduction
Other, net
Effective tax rate
Year Ended September 30,
2019
2020 (1)
2018
21.0%
(1.1)
2.7
(1.3)
—
(0.5)
3.7
0.1
—
(4.1)
—
(51.2)
1.3
(0.7)
1.7
(2.9)
(31.3)%
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
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)%
(1) The negative tax rate for fiscal year 2020 is the result of applying total income tax expense to the loss before income taxes.
The signs within the table are consequently the opposite compared to prior year.
(2) 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.
96
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, net of federal benefit
State credit carryforwards, net of federal benefit
Federal and foreign net operating loss carryforwards
Restricted stock and options
Lease liabilities
Other
Total
Deferred income tax liabilities:
Property, plant and equipment
Deductible intangibles and goodwill
Inventory reserves
Deferred gain
Basis difference in joint ventures
Right-of-use assets
Total
Valuation allowances
Net deferred income tax liability
September 30,
2020
2019
$
$
5.3
121.3
60.5
67.0
79.4
188.3
33.7
179.1
52.8
787.4
1,885.5
841.5
216.2
272.2
33.8
163.8
3,413.0
257.5
2,883.1
$
$
10.7
125.1
96.8
57.6
69.5
173.5
39.3
—
52.8
625.3
1,840.5
914.7
188.3
275.2
33.1
—
3,251.8
218.0
2,844.5
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,
2020
2019
$
$
33.8 $
2,916.9
2,883.1 $
33.5
2,878.0
2,844.5
(1) The long-term deferred tax asset is presented in Other assets on the consolidated balance sheets.
At September 30, 2020 and September 30, 2019, we had gross U.S. federal net operating losses of
approximately $2.6 million and $4.0 million, respectively. These loss carryforwards generally expire between fiscal
2031 and 2038.
At September 30, 2020 and September 30, 2019, we had gross state and local net operating losses, of
approximately $1,795 million and $1,638 million, respectively. These loss carryforwards generally expire between
fiscal 2022 and 2040. The tax effected values of these net operating losses are $67.0 million and $57.6 million at
September 30, 2020 and 2019, respectively, exclusive of valuation allowances of $12.7 million and $10.2 million at
September 30, 2020 and 2019, respectively.
At September 30, 2020 and September 30, 2019, gross net operating losses for foreign reporting purposes of
approximately $765.1 million and $663.2 million, respectively, were available for carryforward. A majority of these
loss carryforwards generally expire between fiscal 2022 and 2040, while a portion have an indefinite carryforward.
The tax effected values of these net operating losses are $187.7 million and $172.5 million at September 30, 2020
and 2019, respectively, exclusive of valuation allowances of $165.9 million and $144.1 million at September 30,
2020 and 2019, respectively.
97
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At September 30, 2020 and 2019, we had state tax credit carryforwards of $79.4 million and $69.5 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 $71.9 million and $56.8 million at
September 30, 2020 and 2019, 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
2020, 2019 and 2018 (in millions):
Balance at beginning of fiscal year
Increases
Allowances related to purchase accounting (1)
Reductions
Balance at end of fiscal year
2020
2019
2018
$
$
218.0 $
46.2
—
(6.7)
257.5 $
229.4 $
25.4
0.8
(37.6)
218.0 $
219.1
50.8
0.1
(40.6)
229.4
(1) Amounts in fiscal 2019 relate to the KapStone Acquisition. Amounts in fiscal 2018 relate to the MPS Acquisition.
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, 2020, we estimate our outside basis difference in foreign subsidiaries that are considered
indefinitely reinvested to be approximately $1.7 billion. The components of the outside basis difference are
comprised of purchase accounting adjustments (i.e. from mergers and acquisitions), 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, 2020, 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 (2)
Reductions due to settlement (3)
Reductions for currency translation adjustments
Reductions as a result of a lapse of the applicable statute of
limitations
Balance at end of fiscal year
2020
2019
2018
$
$
224.3 $
—
5.0
11.7
(16.7)
—
(8.8)
(8.8)
206.7 $
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
(1) Amounts in fiscal 2019 relate to the KapStone Acquisition. Amounts in fiscal 2018 relate to the MPS Acquisition.
(2) Additions for tax positions taken in fiscal 2019 and reductions taken in fiscal 2020 include primarily positions taken related
to foreign subsidiaries.
98
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(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.
As of September 30, 2020 and 2019, the total amount of unrecognized tax benefits was approximately $206.7
million and $224.3 million, respectively, exclusive of interest and penalties. Of these balances, as of September 30,
2020 and 2019, if we were to prevail on all unrecognized tax benefits recorded, approximately $189.5 million and
$207.5 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, 2020, we had liabilities of $72.4 million related to
estimated interest and penalties for unrecognized tax benefits. As of September 30, 2019, we had liabilities of
$80.0 million, related to estimated interest and penalties for unrecognized tax benefits. Our results of operations for
the fiscal year ended September 30, 2020, 2019 and 2018 include expense of $6.6 million, $9.7 million and $5.8
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, 2020, it is reasonably possible that our unrecognized tax
benefits will decrease by up to $21.9 million in the next twelve months due to expiration of various statues of
limitations and settlement of issues.
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 income tax examinations by tax authorities for years prior to
fiscal 2017 and state and local income tax examinations by tax authorities for years prior to fiscal 2010. We are no
longer subject to non-U.S. income tax examinations by tax authorities for years prior to fiscal 2009, 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
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 previously sold
real estate, primarily in the Charleston, SC region. With the completion of the monetization, this segment will no
longer exist. 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 selected operating data 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,
2019
2018
2020
Foreign net sales to unaffiliated customers
Foreign segment income
Foreign long-lived assets
$
$
$
3,105.6
298.2
1,390.6
$
$
$
3,332.4
392.3
1,466.4
$
$
$
3,236.7
360.7
1,400.2
Foreign operations as a percent of consolidated operations:
Foreign net sales to unaffiliated customers
Foreign segment income
Foreign long-lived assets
17.7%
21.9%
12.9%
18.2%
21.9%
13.1%
19.9%
21.1%
15.4%
99
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 the related investments in segment
identifiable assets. Equity in income of unconsolidated entities is not material and we disclose our investments in
unconsolidated entities below.
The following table shows selected operating data for our segments (in millions):
Years Ended September 30,
2019
2018
2020
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)
Land and Development impairments
Restructuring and other costs
Goodwill impairment
Non-allocated expenses
Interest expense, net
Loss on extinguishment of debt
Other income, net
(Loss) income before income taxes
Depreciation and amortization:
Corrugated Packaging
Consumer Packaging
Land and Development
Corporate
Total
$
$
$
$
$
$
$
$
$
$
100
11,419.2
6,333.0
18.9
17,771.1
71.0
121.3
192.3
11,348.2
6,211.7
18.9
17,578.8
1,037.7
323.7
1.4
1,362.8
15.6
1.1
—
(112.7)
(1,333.2)
(70.7)
(393.5)
(1.5)
9.5
(522.6)
$
$
$
$
$
$
$
$
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
Years Ended September 30,
2019
2018
2020
951.4 $
529.5
—
6.1
1,487.0 $
950.6 $
552.1
—
8.5
1,511.2 $
700.5
546.5
0.7
4.5
1,252.2
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 Hurricane Michael-related 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. In fiscal 2020, we
received the remaining Hurricane Michael-related insurance proceeds of $32.3 million, that were recorded as a
reduction of cost of goods sold in our Corrugated Packaging segment. The insurance proceeds consisted of $11.7
million of business interruption recoveries and $20.6 million for direct costs and property damage. Our
consolidated statement of cash flows for fiscal 2020 included $30.9 million in net cash provided by operating
activities and $1.4 million of cash proceeds included in net cash used for investing activities related to Hurricane
Michael. In addition, we had other minor amounts for various claims that were recorded as a reduction of cost of
goods sold across our segments.
Corrugated Packaging segment income in fiscal 2019 and 2018 was reduced by $24.7 million and $1.0 million,
respectively, of expense for inventory stepped-up in purchase accounting, net of related LIFO impact.
The following table shows selected operating data for our segments (in millions):
Years Ended September 30,
2019
2018
2020
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
Capital expenditures:
Corrugated Packaging
Consumer Packaging
Corporate
Total
Equity method investments:
Corrugated Packaging
Consumer Packaging
Corporate
Total
$
$
$
$
$
$
$
$
$
$
16,507.0 $
9,584.9
—
7.0
2,680.8
28,779.7 $
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
3,673.5 $
2,288.7
5,962.2 $
3,695.0 $
3,590.6
7,285.6 $
1,966.7
3,610.9
5,577.6
1,423.0 $
2,244.2
3,667.2 $
1,655.1 $
2,404.4
4,059.5 $
506.2
2,615.8
3,122.0
731.1 $
217.1
29.9
978.1 $
961.4 $
365.9
41.8
1,369.1 $
414.3 $
14.9
0.4
429.6 $
457.1 $
11.6
0.4
469.1 $
657.3
308.3
34.3
999.9
455.6
1.8
0.4
457.8
The Corrugated Packaging segment’s equity method investments primarily relate to the Grupo Gondi
investment. Equity method investments are included in the balance sheet in other assets. The investment in Grupo
Gondi that in fiscal 2020 and 2019 exceeds our proportionate share of the underlying equity in net assets by
approximately $101.7 million and $121.4 million, respectively. Approximately $41.9 million and $53.1 million
101
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
The changes in the carrying amount of goodwill for the fiscal years ended September 30, 2020, 2019 and 2018
are as follows (in millions):
Balance as of October 1, 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
Goodwill impairment
Goodwill disposed of
Purchase price allocation adjustments
Translation adjustments
Balance as of September 30, 2020
Goodwill
Accumulated impairment losses
Corrugated
Packaging
Consumer
Packaging
Total
$
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)
3,695.1
(0.1)
3,695.0
—
—
14.3
(35.8)
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)
3,633.3
(42.7)
3,590.6
(1,333.2)
(0.3)
(0.6)
32.2
3,673.6
(0.1)
3,673.5 $
3,664.6
(1,375.9)
2,288.7 $
$
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
(1,333.2)
(0.3)
13.7
(3.6)
7,338.2
(1,376.0)
5,962.2
See “Note 1. Description of Business and Summary of Significant Accounting Policies — Goodwill and
Long-Lived Assets” for a discussion of a $1,333.2 million pre-tax non-cash goodwill impairment of our Consumer
Packaging reporting unit.
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 acquisition of MPS and the acquisition of Hanna
Group Pty Ltd. The goodwill disposed of in the Corrugated Packaging segment in fiscal 2018 related to the sale of
our solid waste management brokerage services business. See “Note 3. Acquisitions and Investments” for
additional information.
102
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 8.
Interest Expense, Net
The components of interest expense, net is as follows (in millions):
Interest expense
Interest income
Interest expense, net
Note 9.
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
Years Ended September 30,
2019
2018
2020
$
$
(465.5)
72.0
(393.5)
$
$
(489.4)
58.1
(431.3)
$
$
(352.8)
59.0
(293.8)
September 30,
2020
2019
$
$
$
844.2
772.7
500.3
2,117.2
(93.8)
$
2,023.4
938.9
818.8
479.7
2,237.4
(129.9)
2,107.5
It is impracticable to segregate the LIFO reserve between raw materials, finished goods and work in process.
In fiscal 2020, 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. Alternatively, they have higher costs prevailing in prior years which increases costs of goods sold. The impact
of the liquidations in fiscal 2020, 2019 and 2018 was not significant.
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,
2020
2019
$
$
$
2,524.7
15,147.3
110.8
29.1
103.6
17,915.5
(7,136.6)
$
10,778.9
2,442.3
14,743.6
144.0
31.2
100.2
17,461.3
(6,271.8)
11,189.5
Depreciation expense for fiscal 2020, 2019 and 2018 was $1,054.9 million, $1,074.6 million and $923.8 million,
respectively.
103
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,
2020
2019
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
15.5 $
21.6
7.2
11.4
8.0
2.0
29.5
15.5 $
5,418.1 $
130.5
44.0
37.5
26.5
3.4
3.7
5,663.7 $
(1,841.2) $
(65.7)
(41.6)
(21.6)
(22.8)
(3.3)
(0.3)
(1,996.5) $
Accumulated
Amortization
(1,452.1)
(55.3)
(42.6)
(21.2)
(20.5)
(2.9)
(0.2)
(1,594.8)
5,395.5 $
129.9
57.0
39.2
25.7
3.4
3.6
5,654.3 $
Estimated intangible asset amortization expense for the succeeding five fiscal years is as follows (in millions):
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
$
$
$
$
$
356.8
349.3
343.1
322.6
308.0
Intangible amortization expense was $405.4 million, $408.0 million and $300.8 million during fiscal 2020, 2019
and 2018, respectively. We had other intangible amortization expense, primarily for packaging equipment leased
to customers of $26.7 million, $28.6 million and $27.6 million during fiscal 2020, 2019 and 2018, 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.
104
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 and September 17, 2020, we further amended the A/R Sales Agreement and increased the
purchase limit to $650.0 million and $700.0 million, respectively. 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. Effective with the September 17, 2020 amendment, the
facility is committed and has a term of 364 days. 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 2020 and
2019 (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,
2020
2019
— $
2,446.2
(2,449.4)
3.2
— $
—
2,051.6
(1,971.1)
(80.5)
—
$
$
Receivables sold under our A/R Sales Agreement were approximately $589.4 million and $592.6 million as of
September 30, 2020 and September 30, 2019, respectively.
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. While the expense recorded in connection with the
sale of receivables may vary based on current rates and levels of receivables sold, the expense recorded in
connection with the sale of receivables was $12.7 million, $17.3 million and $11.2 million in fiscal 2020, 2019 and
2018, respectively, and is recorded in “other income, net” in the consolidated statements of operations. 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.
Fair Value of Nonfinancial Assets and Nonfinancial Liabilities
As discussed in “Note 1. Description of Business and Summary of Significant Accounting Policies”, we
measure certain nonfinancial assets and nonfinancial liabilities at fair value on a nonrecurring basis. See “Note 1.
Description of Business and Summary of Significant Accounting Policies — Goodwill and Long-Lived
Assets” for a discussion of a $1,333.2 million pre-tax non-cash goodwill impairment of our Consumer Packaging
reporting unit. See “Note 4. Restructuring and Other Costs” for impairments associated with restructuring
activities including the impairment of a paper machine at our Evadale, TX mill included in the Consumer Packaging
segment in fiscal 2020, the impairment of a paper machine at our Charleston, SC mill included in the Corrugated
Packaging segment in fiscal 2019 and other such similar items presented as “net property, plant and equipment
costs”. During fiscal 2020, 2019 and 2018, we did not have any significant non-goodwill or 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
relationship, and (ii) the $31.9 million impairment of certain mineral rights and real estate in fiscal 2018. 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
105
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, 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
finance 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, 2020, all of our debt
was unsecured with the exception of our Receivables Securitization Facility (as defined below) and finance lease
obligations.
The following were individual components of debt (in millions, except percentages):
September 30, 2020
September 30, 2019
Carrying
Value
Weighted Avg
Interest Rate
Carrying
Value
Weighted Avg
Interest Rate
Public bonds due fiscal 2020 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
Finance lease obligations
Vendor financing and commercial card
programs
International and other debt
Total debt
Less: current portion of debt
Long-term debt due after one year
$
$
399.3
3,773.6
2,778.9
178.6
1,547.6
250.0
—
274.8
89.8
138.0
9,430.6
222.9
9,207.7
5.0% $
4.0%
4.5%
6.2%
1.9%
1.1%
N/A
4.0%
507.8
3,769.1
2,197.6
179.0
2,295.5
396.0
339.2
185.8
123.2
N/A
3.1%
70.2
3.8% 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%
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, 2020. The increase in finance lease obligations during fiscal 2020 was primarily the result of our
adoption on October 1, 2019 of the leasing guidance codified in ASC 842 that caused us to recharacterize a short-
term and long-term liability for two chip mills to a $100.3 million finance lease obligation. 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, 2020, excluding the step-up, the weighted average
interest rate on total debt was 3.9%. At September 30, 2020, the unamortized fair market value step-up was
$208.9 million, which will be amortized over a weighted average remaining life of 11.5 years. At September 30,
2020, we had $62.9 million of outstanding letters of credit not drawn upon. At September 30, 2020, we had
approximately $3.6 billion of availability under long-term committed credit facilities and cash and cash equivalents.
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
$10.4 billion and $10.6 billion as of September 30, 2020 and September 30, 2019, 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 2020, 2019 and 2018, amortization of debt issuance
costs charged to interest expense were $8.2 million, $7.8 million and $6.3 million, respectively.
106
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Public Bonds / Notes Issued
At September 30, 2020 and September 30, 2019, the face value of our public bond obligations outstanding
were $7.0 billion and $6.5 billion, respectively.
On June 1, 2020, WRKCo issued $600.0 million aggregate principal amount of its 3.00% Senior Notes
due 2033 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 June 2033 Notes transaction closed on
June 3, 2020. The June 2033 Notes are WRKCo’s unsecured unsubordinated obligations, ranking equally with all
of WRKCo’s other existing and future unsubordinated obligations. The June 2033 Notes will be effectively
subordinated to any of WRKCo’s existing and future secured obligations to the extent of the value of the assets
securing such obligations. WestRock Company (“Parent”), RKT and MWV (MWV together with RKT, the
“Guarantor Subsidiaries”) guaranteed WRKCo’s obligations under the June 2033 Notes. We may redeem the
June 2033 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 June 2033 Notes were primarily used to repay the $100.0 million
principal amount of MWV’s 9.75% notes due June 2020 and reduce outstanding indebtedness under our
Receivables Securitization Facility (as defined below) and Revolving Credit Facility (as defined below).
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. The Company and
the Guarantor Subsidiaries 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 that came due in the following several quarters and reduce outstanding
indebtedness under our 3-year delayed draw term loan under our Delayed Draw Credit Facilities (as defined
below).
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 Guarantor Subsidiaries 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 then outstanding under our Delayed Draw
Credit Facilities.
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 then 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.
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.
107
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Revolving Credit Facility
On November 21, 2019, we amended our $2.0 billion unsecured revolving credit facility entered into on July 1,
2015 to, among other things, increase the committed principal to $2.3 billion, increase the maximum permitted
Debt to Capitalization Ratio (as defined in the credit agreement) from 0.60:1:00 to 0.65:1.00 and extend its maturity
date to November 21, 2024 (“Revolving Credit Facility”). The facility is unsecured and is guaranteed by the
Company and the Guarantor Subsidiaries. The portion of the 5-year senior unsecured revolving credit facility that
may be used to fund borrowings in non-U.S. dollar currencies including Canadian dollars, Euro and British Pounds
was increased from $400 million to $500 million. Up to $150 million under the Revolving Credit Facility may be
used for the issuance of letters of credit. 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, 2020 and September 30, 2019,
we had no amounts outstanding under the Revolving Credit Facility.
At our option, loans issued under the Revolving 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
1.75% per annum (or between the alternate base rate plus 0.00% per annum and the alternate base rate plus
0.75% 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 0.30% 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 Revolving Credit Facility may be prepaid at any time without premium.
Bank of America Term Loan
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 then outstanding amount under our commercial
paper program. The applicable interest rate margin was 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, 2020 and September 30, 2019, the carrying value of this facility was
$300.0 million and $300.0 million outstanding, respectively.
Farm Loan Credit Facility
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 Loan Credit Facility is guaranteed by the Company, WRKCo and the
Guarantor Subsidiaries and replaced the then-existing facility. The carrying value of this facility at September 30,
2020 and 2019 was $598.7 million and $598.6 million, respectively.
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. This facility provides for a 3-year unsecured U.S. dollar, Euro and British Pound denominated
borrowing of not more than €500.0 million. On November 21, 2019, we amended the facility to, among other things,
extend the maturity date from April 27, 2021 to November 21, 2022. At September 30, 2020, we had borrowed
$250.0 million under this facility that was classified as long-term debt, and entered into foreign currency exchange
contracts of $250.2 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, we had borrowed $350.0
million under this facility, $175.0 million of which was classified as short-term debt.
108
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 facility was subsequently renewed on October 29, 2018 and October 25,
2019, each for 364 days. At September 30, 2019, there were no amounts outstanding, and the average borrowing
rate under the facility would have been 3.17%. In connection with the amendment of the Revolving Credit Facility,
on November 21, 2019, we terminated the facility.
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. On
March 27, 2020, we amended the facility to add additional Company legal entities that may serve to increase the
amount of eligible receivables serving as collateral. 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, 2020. 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, 2020 and September 30, 2019 there were no amounts outstanding under this facility. At September
30, 2020 and September 30, 2019, maximum available borrowings, excluding amounts outstanding under the
Receivables Securitization Facility, were $700.0 million and $592.1 million, respectively. The carrying amount of
accounts receivable collateralizing the maximum available borrowings at September 30, 2020 and September 30,
2019 were approximately $1,128.3 million and $959.3 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, 2020 and September 30, 2019, respectively.
Commercial Paper Program
On December 7, 2018, we 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 terminated by either the agent or us with not less than 30 days’ notice. Our 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 initially 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. The new program replaced our then-existing program. At September
30, 2020, there was no amount outstanding. 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 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 Delayed
Draw Credit Facilities are senior unsecured obligations of WRKCo, as borrower, and each of the Company and the
Guarantor Subsidiaries, respectively, as guarantors. Loans under the Delayed Draw Credit Facilities may be
prepaid at any time without premium.
109
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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. On February 26,
2019, we amended the Delayed Draw Credit Agreement. 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.
At September 30, 2019, there were no amounts outstanding under the 364-day and 3-year term loans, and the
carrying value of the 5-year term loan was $1,396.9 million. In fiscal 2020, we prepaid $750.0 million of our 5-year
term loan using cash and cash equivalents and proceeds from the issuance of commercial paper. At
September 30, 2020, the carrying value of the 5-year term loan was $648.9 million.
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,
2020 and 2019, the carrying value of the facility was R$695.1 million and R$199.5 million, respectively.
Aggregate Maturities of Debt
As of September 30, 2020, the aggregate maturities of debt, excluding finance lease obligations, for the
succeeding five fiscal years and thereafter are as follows (in millions):
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Thereafter
Fair value of debt step-up, deferred financing costs and unamortized
bond discounts
Total
$
$
214.2
438.7
639.1
1,386.8
600.0
5,729.1
147.9
9,155.8
See “Note 15. Leases” of the Notes to Consolidated Financial Statements for the aggregate maturities of
finance lease obligations for the succeeding five fiscal years and thereafter.
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, the 2032 Notes and the June 2033 Notes (collectively, 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 Guarantor Subsidiaries. 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, the 2032
Notes and the June 2033 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 Guarantor
110
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Subsidiaries. Accordingly, each series of the Notes is fully and unconditionally guaranteed on a joint and several
basis by Parent and the Guarantor Subsidiaries.
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 Guarantor Subsidiaries, the non-guarantor subsidiaries and eliminations. Such
financial data include Condensed Consolidating Balance Sheet data as of September 30, 2020 and 2019 and the
related Condensed Consolidating Statement of Income and Cash Flow data for each of the three years in the
period ended September 30, 2020.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(In millions)
Parent
Issuer
Year Ended September 30, 2020
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative,
excluding intangible amortization
Selling, general and administrative
intangible amortization
Gain on disposal of assets
Multiemployer pension withdrawal
(income) expense
Restructuring and other costs
Goodwill impairment
Operating (loss) profit
Interest expense, net
Intercompany interest (expense)
income, net
Loss on extinguishment of debt
Pension and other postretirement
non-service (expense) income
Other income (expense), net
Equity in income of unconsolidated
entities
Equity in (loss) income of
consolidated entities
(Loss) income before income taxes
Income tax benefit (expense)
Consolidated net (loss) income
Less: Net income attributable to
noncontrolling interests
Net (loss) income attributable to
common stockholders
Comprehensive (loss) income
attributable to common
stockholders
— $ 2,430.9 $
1,916.7
—
514.2
—
17,740.7 $ (2,592.8) $ 17,578.8
14,381.6
(2,561.2)
15,026.1
3,197.2
(31.6)
2,714.6
2.8
101.2
1,520.4
—
1,624.4
—
—
99.5
(0.1)
—
—
400.5
(16.3)
$
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
4.6
—
(7.4)
(250.1)
(10.2)
(1.4)
(1.9)
—
746.9
(431.4)
(137.9)
(80.7)
—
(6.9)
(82.6)
—
0.1
—
0.2
301.0
(16.2)
0.8
108.1
586.3
214.2
(5.5)
59.3
(0.1)
110.2
91.8
—
—
—
15.8
(691.0)
(690.9)
—
(690.9)
(343.2)
(612.1)
77.7
(534.4)
228.6
(510.9)
11.4
(499.5)
—
485.7
(252.6)
233.1
805.6
805.6
—
805.6
—
—
—
(4.8)
—
(4.8)
$ (690.9) $ (534.4) $
(499.5) $
228.3 $
805.6 $
(690.9)
$ (868.2) $ (711.0) $
(677.1) $
51.4 $ 1,336.7 $
(868.2)
111
—
—
—
(31.6)
—
31.6
—
—
—
—
(1.1)
112.7
1,333.2
(256.2)
(393.5)
—
(1.5)
103.3
9.5
15.8
—
(522.6)
(163.5)
(686.1)
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended September 30, 2019
(In millions)
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
$
Net sales
Cost of goods sold
Gross profit
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
to common stockholders
$
$
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $ 2,543.8 $
2,026.0
—
517.8
—
18,364.4 $ (2,619.2) $ 18,289.0
14,540.0
(2,600.2)
15,114.2
3,749.0
(19.0)
3,250.2
(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 1,157.3
892.7
862.9
67.9
—
960.6
862.9
736.5
746.1
7.2
753.3
—
1,399.7
(351.9)
1,047.8
(2,756.7)
(2,756.7)
—
(2,756.7)
—
1,144.7
(276.8)
867.9
—
—
—
(5.0)
—
(5.0)
862.9 $
960.6 $
753.3 $
1,042.8 $ (2,756.7) $
862.9
489.0 $
588.0 $
389.4 $
682.4 $ (1,659.8) $
489.0
112
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(In millions)
Parent
Issuer
Year Ended September 30, 2018
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
$
Net sales
Cost of goods sold
Gross profit
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
—
588.8
—
16,345.4 $ (2,653.3) $ 16,285.1
12,923.1
(2,653.3)
13,572.2
3,362.0
—
2,773.2
—
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
19.9
3.1
(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
113
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2020
(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
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
— $
—
—
0.5
—
—
0.5
—
—
—
— $
—
—
—
3.0
—
3.0
—
—
—
105.7 $
41.6
175.3
11.6
1.5
—
335.7
15.2
411.7
1,385.5
145.4 $
2,152.0
1,848.1
508.4
1,798.6
7.0
6,459.5
10,763.7
5,550.5
2,281.7
— $
(50.9)
—
—
(1,803.1)
—
(1,854.0)
251.1
2,142.7
2,023.4
520.5
—
7.0
4,944.7
— 10,778.9
5,962.2
—
3,667.2
—
—
—
—
—
—
168.8
—
—
141.1
1,267.5
368.7
2,821.3
—
—
(3,131.2)
1,267.5
368.7
—
11,070.4 17,829.4 19,685.2
220.8
$11,070.9 $18,064.8 $ 22,195.2 $
63.6
—
— (48,585.0)
(59.4)
—
1,790.5
31,078.4 $(53,629.6) $ 28,779.7
1,565.5
$
— $
—
99.8 $
1.9
— $
27.7
123.1 $
1,695.5
— $
(50.9)
222.9
1,674.2
0.1
—
440.2
440.3
—
27.1
643.6
772.4
— 6,108.3
753.3
—
10.2
71.0
440.8
549.7
1,968.3
2,068.0
376.4
547.0
278.5
3,020.5
1,131.1
309.9
—
—
(1,803.1)
(1,854.0)
—
(3,131.2)
386.7
645.1
—
2,928.9
9,207.7
—
—
—
—
—
—
—
149.7
155.5
—
305.2
—
25.9
119.5
—
145.4
—
—
13.0
—
221.1
147.1
1,136.5
2,755.2
1,330.2
—
(59.4)
—
1,136.5
2,916.9
1,490.3
—
—
—
10,630.6 10,417.8 17,065.4
—
10,630.6 10,417.8 17,065.4
$11,070.9 $18,064.8 $ 22,195.2 $
—
—
—
1.3
1.3
21,101.8 (48,585.0) 10,630.6
16.9
21,118.7 (48,585.0) 10,647.5
31,078.4 $(53,629.6) $ 28,779.7
16.9
—
114
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
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
— $
—
—
—
—
—
—
—
—
—
—
—
—
— $
—
—
1.2
227.7
—
228.9
—
—
—
—
—
155.0
17.8 $
31.1
254.3
11.8
—
—
315.0
18.9
1,158.6
1,485.0
133.8 $
2,201.7
1,853.2
483.2
1,128.6
25.8
5,826.3
11,170.6
6,127.0
2,574.5
— $
(39.6)
—
—
(1,356.3)
—
(1,395.9)
151.6
2,193.2
2,107.5
496.2
—
25.8
4,974.3
— 11,189.5
7,285.6
—
4,059.5
—
—
—
156.9
1,274.3
224.7
3,026.8
—
—
(3,338.7)
1,274.3
224.7
—
11,973.6 18,524.2 20,103.6
185.3
$11,973.6 $18,975.9 $ 23,423.3 $
67.8
—
— (50,601.4)
(76.1)
—
1,148.8
31,196.0 $(55,412.1) $ 30,156.7
971.8
$
— $
—
135.3 $
0.7
108.9 $
31.3
316.9 $
1,839.4
— $
(39.6)
561.1
1,831.8
0.3
—
303.4
303.7
—
18.6
—
154.6
— 6,608.0
636.3
—
14.5
83.8
1,052.9
1,291.4
1,982.9
2,390.5
455.6
469.4
—
3,081.3
911.4
311.9
—
—
(1,356.3)
(1,395.9)
—
(3,338.7)
470.4
571.8
—
3,435.1
9,502.3
—
—
—
—
—
—
—
147.6
146.4
—
294.0
—
25.7
136.4
—
162.1
—
—
12.9
—
278.9
131.2
1,145.2
2,675.2
909.8
—
(76.1)
—
1,145.2
2,878.0
1,053.9
—
—
—
11,669.9 11,564.1 17,175.1
—
11,669.9 11,564.1 17,175.1
$11,973.6 $18,975.9 $ 23,423.3 $
—
—
—
1.9
1.9
21,862.2 (50,601.4) 11,669.9
14.3
21,876.5 (50,601.4) 11,684.2
31,196.0 $(55,412.1) $ 30,156.7
14.3
—
115
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(In millions)
Parent
Issuer
Year Ended September 30, 2020
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
Operating activities:
Net cash provided by operating
activities
Investing activities:
Capital expenditures
Investment in unconsolidated
entities
Proceeds from sale of property,
plant and equipment
Proceeds from property, plant and
equipment insurance settlement
Intercompany notes proceeds
Other
Net cash provided by (used for)
investing activities
Financing activities:
Proceeds from issuance of notes
Additions to revolving credit facilities
Repayments of revolving credit
facilities
Additions to debt
Repayments of debt
Changes in commercial paper, net
Other financing repayments
Issuances of common stock, net of
Cash dividends paid to
stockholders
Cash distributions paid to
noncontrolling interests
Intercompany notes payments
Other
Net cash used for financing
activities
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
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
$
related minimum tax withholdings
22.2
$
322.3 $
540.5 $
171.1 $
1,036.8 $
— $
2,070.7
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(344.5)
—
—
—
—
—
—
1.5
—
—
—
—
0.1
1.3
5.7
14.7
(978.1)
(1.3)
34.9
3.7
—
1.7
—
—
—
—
(5.7)
—
(978.1)
(1.3)
35.0
6.5
—
16.4
1.5
21.8
(939.1)
(5.7)
(921.5)
598.6
350.0
(350.0)
—
(750.0)
(339.2)
(46.0)
—
—
—
—
(5.4)
—
—
—
—
(105.0)
—
—
—
—
—
—
—
—
78.0
(178.2)
696.4
(594.2)
—
(34.3)
—
—
(2.4)
(5.7)
(17.1)
—
—
—
—
—
—
—
—
—
—
5.7
—
598.6
428.0
(528.2)
696.4
(1,449.2)
(339.2)
(80.3)
22.2
(344.5)
(2.4)
—
(22.5)
(322.3)
(542.0)
(105.0)
(57.5)
5.7
(1,021.1)
—
—
—
—
—
—
—
(28.6)
87.9
11.6
17.8
133.8
—
—
—
(28.6)
99.5
151.6
— $
— $
105.7 $
145.4 $
— $
251.1
116
The condensed consolidating statements of cash flows for the year ended September 30, 2020 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, 2020
(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
$
$
$
$
— $
— $
(407.3) $
442.0 $
(13.9) $
— $
(625.6) $
35.6 $
(70.4) $
80.6 $
(990.2) $
727.0 $
(117.0) $
322.5 $
— $
— $
201.3 $
(403.1) $
2,023.1 $
(1,204.6) $
Financing activities:
Intercompany notes borrowing
$
Intercompany notes payments
$
Intercompany capital receipt
$
Intercompany capital distribution $
Intercompany dividends paid
$
— $
— $
— $
— $
— $
117.0 $
— $
— $
(442.0) $
— $
— $
(322.5) $
625.2 $
(21.2) $
(48.3) $
84.3 $
(80.6) $
1,397.9 $
(741.4) $
(1,287.3) $
(201.3) $
403.1 $
(2,023.1) $
1,204.6 $
1,335.6 $
—
—
—
—
—
—
—
—
—
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 for purchase of
businesses, 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 to revolving credit facilities
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
—
—
2,498.2
67.2
—
—
—
155.0
(160.0)
959.8
(2,274.1)
—
6.2
—
—
—
—
—
—
—
—
(67.2)
4,101.8
(2,400.0)
339.2
46.0
18.3
(88.6)
(467.9)
—
—
—
—
—
—
563.0
—
—
—
(3,800.0)
—
(27.9)
—
—
(957.5)
—
—
—
—
—
—
75.7
(70.1)
—
—
(4.3)
0.1
(16.0)
563.0
36.0
—
(75.8)
3,886.1
(1,126.0)
—
—
—
—
—
—
—
—
—
—
—
2,498.2
222.2
(227.2)
5,061.6
(5,631.6)
339.2
52.2
18.3
(88.6)
(467.9)
(4.3)
—
—
—
8.1
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
$
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
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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:
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
Additions to revolving credit facilities
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
$
4.1 $
563.4 $
375.8 $
1,016.3 $
(28.4) $
1,931.2
—
—
(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
—
—
—
—
—
2.7
(0.1) (1,025.2)
(106.7)
—
—
—
—
26.6
(195.1)
(440.9)
—
—
—
—
—
—
(4.0)
—
—
—
—
—
—
(19.9)
—
—
—
—
(22.5)
(8.9)
—
—
—
—
—
—
—
—
—
—
—
702.4
(572.2)
852.5
(985.1)
(154.3)
—
—
—
(33.3)
1.4
(4.5)
2.0
(82.6)
(28.4)
31.6
—
—
—
—
—
—
—
—
—
—
(1.4)
4.5
(2.0)
82.6
28.4
—
1,197.3
702.4
(572.2)
855.2
(2,032.9)
(269.9)
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 include intercompany non-cash capitalizations, 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.
Year Ended September 30, 2018
(In millions)
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries Eliminations
Consolidated
Total
Investing activities:
Intercompany notes issued
Intercompany notes proceeds
Intercompany capital investment
Intercompany return of capital
$
$
$
$
Financing activities:
Intercompany notes borrowing
$
Intercompany notes payments
$
Intercompany capital receipt
$
Intercompany capital distribution $
Intercompany dividends paid
$
Note 15. Leases
— $
— $
— $
— $
— $
— $
(755.3) $
1,356.3 $
— $
— $
(335.3) $
766.0 $
(392.1) $
83.0 $
— $
— $
392.1 $
(83.0) $
1,090.6 $
(2,122.3) $
— $
— $
— $
— $
— $
— $
(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 $
—
—
—
—
—
—
—
—
—
On October 1, 2019, we adopted ASC 842, using the modified retrospective approach and as a result we did
not restate prior periods as discussed in “Note 1. Description of Business and Summary of Significant
Accounting Policies — Leased Assets”. We elected the package of three practical expedients permitted within
the standard pursuant to which we did not reassess initial direct costs, lease classification or whether our contracts
contain or are leases. The adoption of ASC 842 resulted in the recognition of ROU assets of $731.1 million (net of
deferred rent and favorable/unfavorable lease liabilities) with corresponding operating lease liabilities of $783.9
million.
Components of Lease Costs
The following table presents certain information related to the lease costs for finance and operating leases (in
millions):
Operating lease costs
Variable and short-term lease costs
Sublease income
Finance lease cost:
Amortization of lease assets
Interest on lease liabilities
Total lease cost, net
Year Ended
September 30, 2020
201.2
105.5
(6.7)
10.5
7.9
318.4
$
$
121
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Supplemental Balance Sheet Information Related to Leases
The table below presents the lease-related assets and liabilities recorded on the balance sheet (in millions):
Consolidated Balance Sheet Caption
September 30, 2020
Operating leases:
Operating lease right-of-use asset
Other assets
Current operating lease liabilities
Noncurrent operating lease liabilities
Total operating lease liabilities
Other current liabilities
Other long-term liabilities
Finance leases:
Property, plant and equipment
Accumulated depreciation
Property, plant and equipment, net
Current finance lease liabilities
Noncurrent finance lease liabilities
Total finance lease liabilities
Current portion of debt
Long-term debt due after one year
$
$
$
$
$
$
$
658.6
172.7
545.8
718.5
143.2
(19.1)
124.1
9.0
265.8
274.8
Our finance lease portfolio includes certain assets that are either fully depreciated or transferred for which the
lease arrangement requires a one-time principal repayment on the maturity date of the lease obligation.
Lease Term and Discount Rate
Weighted average remaining lease term:
Operating leases
Finance leases
Weighted average discount rate:
Operating leases
Finance leases
September 30, 2020
5.9 years
9.0 years
2.6%
4.0%
Supplemental Cash Flow Information Related to Leases
The table below presents supplemental cash flow information related to leases (in millions):
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases
Operating cash flows related to finance leases
Financing cash flows related to finance leases
ROU assets obtained in exchange for lease liabilities:
Operating leases
Year Ended
September 30, 2020
$
$
$
$
204.1
7.8
10.1
124.4
122
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Maturity of Lease Liabilities
The table below reconciles the undiscounted cash flows for each of the first five years and total of the
remaining years to the operating lease liabilities and finance lease liabilities recorded on the balance sheet (in
millions):
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Thereafter
Total lease payments
Less: Interest (1)
Present value of future lease payments
September 30, 2020
Operating
Leases
Finance Leases
Total
$
$
188.7 $
151.4
119.1
94.1
63.2
164.4
780.9
(62.4)
718.5 $
16.3 $
15.3
13.2
12.0
12.0
288.3
357.1
(82.3)
274.8 $
205.0
166.7
132.3
106.1
75.2
452.7
1,138.0
(144.7)
993.3
(1) Calculated using the interest rate for each lease.
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 and 2018 was approximately $346.7 million and
$243.7 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 2020 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
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.
123
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, 2020, the Timber Note was $372.4 million and is included
within restricted assets held by special purpose entities on the consolidated balance sheet and the secured
financing liability was $326.2 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, 2020, 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 2020 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, 2020, the Installment Note was $895.1 million and is
included within restricted assets held by special purpose entities on the consolidated balance sheet and the
secured financing liability was $810.3 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, 2020, 2019 and 2018 were approximately $311.5 million, $368.4 million and $418.8 million,
respectively. Accounts receivable due from the affiliated companies at September 30, 2020 and 2019 was $23.3
million and $23.0 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,
2020 total approximately $310 million.
Environmental
Environmental compliance requirements are a significant factor affecting our business. We employ
manufacturing processes that involve discharges to water, air emissions, water intake and waste handling
activities. 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. Complex and lengthy processes may be required to obtain and renew approvals,
permits, and licenses for new, existing or modified facilities. Additionally, the use and handling of various chemicals
or hazardous materials require release prevention plans and emergency response procedures. Our integrated
124
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
chemical pulping mills in the U.S. and Brazil are subject to more stringent environmental programs and regulations,
but all of WestRock’s manufacturing facilities have environmental compliance obligations.
On January 31, 2013, the EPA published Boiler MACT. The U.S. Court of Appeals for the District of Columbia
Circuit issued a ruling on the consolidated cases challenging Boiler MACT on July 29, 2016 vacating key portions
of the rule, including emission limits for certain subcategories of solid fuel boilers, and sending it back to the EPA
for further rulemaking. On August 24, 2020, a proposed EPA rule to amend Boiler MACT was published in the
Federal Register in response to issues raised in multiple court decisions concerning the rule. The EPA’s proposal
would change several numeric emission limits for new and existing boilers and process heaters, including new
fluidized bed boilers and existing coal-fired boilers like those at several WestRock paper mills. Based on our
evaluation of the proposed rule, emissions data and testing, we do not believe that the capital or operating costs for
us to comply with the proposed Boiler MACT limits will be material; however, we are continuing to track the
development of the proposed rule and its potential impacts on us. We anticipate we will have up to three years
after the effective date of the final rule to demonstrate compliance with the new Boiler MACT limits.
In addition to Boiler MACT, we are subject to several other federal, state, local and international environmental
rules that may impact our business, including other Maximum Achievable Control Technology standards, National
Ambient Air Quality Standards for nitrogen oxide, sulfur dioxide, fine particulate matter and ozone for facilities and
National Pollutant Discharge Elimination System permitting requirements in the U.S. Legal requirements to review
and revise existing environmental regulations applicable to our business, as well as litigation challenging these
regulations, could result in more stringent or additional compliance obligations that may require capital investments
or increase our operating costs.
We are involved in various administrative and other 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.
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 investigation and remediation 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 damages at these or other sites in the future, could result in
additional costs.
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 or 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.
125
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of September 30, 2020, we had $5.7 million reserved for environmental liabilities on an undiscounted basis,
of which $3.0 million is included in other long-term liabilities and $2.7 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, 2020.
Climate Change
Some of our paper mills, our most energy-intensive manufacturing facilities, burn renewable biomass to
generate more than 60 percent of their energy needs based on overall fuel mix. Most of these facilities also self-
generate the steam and power needed for their manufacturing processes using combined heat and power or
“cogeneration” systems. Our recycling operations help to divert approximately 8 million tons of paper and
packaging from landfills where it would otherwise degrade and release greenhouse gases in the form of methane,
which has a high global warming potential. Our fiber procurement activities create economic incentives for
landowners and family tree farmers to maintain their holdings as working forests that sequester carbon and provide
many other environmental benefits, including protection for fresh water supplies and habitats for diverse species of
plants and animals.
Climate change presents opportunities for our business. For example, the Company produces renewable
energy in abundant amounts and generates RECs. An entity seeking to reduce its greenhouse gas profile can
purchase our RECs and receive the rights to the environmental attributes of the renewable electricity generated by
our integrated Kraft paper mills. The RECs we generate are flexible, market-based tools that support the
renewable energy market and advance climate-related sustainability initiatives. Our recycling activities also may
present the opportunity to generate offsets that could be used to meet climate-related obligations for ourselves or
others.
Climate change also presents potential risks and uncertainties for us. With respect to physical climate risks,
our manufacturing operations may be impacted by weather-related events such as hurricanes and floods,
potentially resulting in lost production, supply chain disruptions and increased material costs. Unpredictable
weather patterns also may impact virgin fiber prices, which may fluctuate during prolonged periods of heavy rain or
drought. On the other hand, changes in climate also could result in more accommodating weather patterns for
greater periods of time in certain areas, which may create favorable fiber market conditions. We incorporate a
review of meteorological forecast data into its fiber procurement decisions and strategies. To the extent that
climate-related risks materialize, and we are unprepared for them, we may incur unexpected costs, which could
have a material effect on our financial results of operations.
Climate change may result in regulatory risks as new laws and regulations aimed at mandating GHG
reductions come into effect. These rules and regulations could take the form of cap-and-trade, carbon taxes, or
GHG reductions mandates for utilities that could increase the cost of purchased electricity. New climate rules and
regulations also may result in higher fossil fuel prices and/or fuel efficiency standards that could increase
transportation costs. Certain jurisdictions in which we have manufacturing facilities or other investments have
already taken actions to address climate change. In the U.S, 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.
In addition to these national efforts, some U.S. states in which we have manufacturing operations, including
Washington, New York and Virginia, are taking measures to reduce GHG emissions, such as requiring GHG
emissions reporting or developing regional cap-and-trade programs. In addition, 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. Other countries in which we conduct business, including China, European Union member states
126
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and India, have set GHG reduction targets in accordance with the agreement signed in April 2016 among over 170
countries that established the Paris Agreement, which became effective in November 2016.
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.
Compliance with climate programs may require future expenditures to meet GHG emission reduction obligations in
future years. These obligations may include carbon taxes, the requirement to purchase of GHG credits, or the need
to acquire carbon offsets. Also, we may be required to make capital and other investments to displace traditional
fossil fuels, such as fuel oil and coal, with lower carbon alternatives, such as biomass and natural gas.
Litigation
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, 2020, there were
approximately 1,200 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. At September 30, 2020, we had $15.2 million reserved for these matters.
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
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
We are challenging claims by the Brazil Federal Revenue Department that we are liable for underpayment of
tax, penalties and interest in relation to a claim that a subsidiary of MeadWestvaco Corporation had reduced its tax
liability related to the goodwill generated by the 2002 merger of two of its Brazil subsidiaries. The matter has
proceeded through the Brazil Administrative Council of Tax Appeals (“CARF”) principally in two proceedings,
covering tax years 2003 to 2008 and 2009 to 2012. The tax and interest claim relating to tax years 2009 to 2012
was finalized and is now the subject of an annulment action we filed in the Brazil federal court. CARF notified us of
its final decision regarding the tax, penalties and interest claims relating to tax years 2003 to 2008 on June 3,
2020. We have filed an annulment action in Brazil federal court with respect to that decision as well. The dispute
related to penalties for tax years 2009 to 2012 remains before CARF.
We assert that we have no liability in these matters. The total amount in dispute before CARF and in the
annulment actions relating to the claimed tax deficiency was R$693 million ($123 million) as of September 30,
2020, including various penalties and interest. The U.S. dollar equivalent has fluctuated significantly due to
changes in exchange rates. The amount of our uncertain tax position reserve for this matter, that excludes certain
penalties, is included in the unrecognized tax benefits table. See “Note 6. Income Taxes”. Resolution of the
uncertain tax positions could have a material adverse effect on our cash flows and results of operations 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
127
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
certain other agreements. We estimate our exposure to these matters could be approximately $50 million. As of
September 30, 2020, we had recorded $9.6 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. The tax authorities in Brazil have filed a Motion of Clarification with the Supreme Court of Brazil and the
timing of the decision is unknown at this time. However, based on our preliminary evaluation and the opinion of our
tax and legal advisors, 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. Due to the volume of
invoices being reviewed (January 2002 to September 2019), we have recorded the estimated recoveries across
several periods beginning in the fourth quarter of fiscal 2019 as we have reviewed the documents and the amount
has become estimable. In fiscal 2020, we recorded a $51.9 million receivable for our expected recovery and
interest that consisted primarily of a $32.1 million reduction of cost of goods sold and $20.5 million reduction of
interest expense, net. In fiscal 2019, we recorded a $12.2 million receivable for our expected recovery and interest
that consisted primarily of cost of goods sold. We are monitoring the status of our remaining cases, and subject to
the resolution in the courts, we may record additional amounts in future periods.
Note 19. Accumulated Other Comprehensive Loss and Other Comprehensive Loss
The following table summarizes the changes in accumulated other comprehensive loss by component for the
fiscal years ended September 30, 2020 and 2019 (in millions):
Deferred
(Loss) Income
on Cash
Flow Hedges
Defined Benefit
Pension and
Postretirement
Plans
Foreign
Currency
Items
Total (1)
$
(0.2) $
(465.9) $
(229.2) $
(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)
(373.9)
(371.9) $ (1,069.2)
(9.9)
5.1
(214.7)
(219.5)
3.6
38.6
—
42.2
(6.3)
—
(5.6) $
43.7
(73.4)
(727.7) $
(214.7)
—
(177.3)
(73.4)
(586.6) $ (1,319.9)
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
Other comprehensive (loss) income before
$
reclassifications
Amounts reclassified from accumulated
other comprehensive loss
Net current period other comprehensive
(loss) income
Reclassification of stranded tax effects
Balance at September 30, 2020
$
(1) All amounts are net of tax and noncontrolling interest.
128
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the reclassifications out of accumulated other comprehensive loss by
component for the fiscal years ended September 30, 2020 and 2019 (in millions):
Amortization of defined benefit pension and
postretirement items: (1)
Actuarial losses (2)
Prior service costs (2)
Reclassification of stranded tax effects (3)
Subtotal defined benefit plans
Derivative Instruments: (1)
Interest rate swap hedge (loss) gain (4)
Natural gas commodity hedge loss (5)
Subtotal derivative instruments
Years Ended September 30,
2020
2019
Pre-Tax Tax
Net of
Tax
Pre-Tax Tax
Net of
Tax
$
(47.7)
(5.0)
—
(52.7)
12.8 $
1.3
73.4
87.5
(34.9) $
(3.7)
73.4
34.8
(22.7)
(2.4)
—
(25.1)
5.9 $
0.6
—
6.5
(16.8)
(1.8)
—
(18.6)
(2.3)
(2.6)
(4.9)
0.6
0.7
1.3
(1.7)
(1.9)
(3.6)
0.3
—
0.3
(0.1)
—
(0.1)
0.2
—
0.2
Total reclassifications for the period
$
(57.6) $
88.8 $
31.2 $
(24.8) $
6.4 $
(18.4)
(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) Amount reclassified to retained earnings as a result of the adoption of ASU 2018-02.
(4) These accumulated other comprehensive income components are included in Interest expense, net.
(5) These accumulated other comprehensive income components are included in Cost of goods sold.
A summary of the components of other comprehensive (loss) income, including noncontrolling interest, for the
years ended September 30, 2020, 2019 and 2018, is as follows (in millions):
Fiscal 2020
Foreign currency translation loss
Deferred loss on cash flow hedges
Reclassification adjustment of net loss on cash flow hedges
included in earnings
Net actuarial gain 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
Pre-Tax
$
(215.0) $
(13.3)
Tax
Net of Tax
(215.0)
(10.0)
— $
3.3
4.9
34.6
48.3
(26.9)
5.1
(162.3)
(1.3)
(10.4)
(12.9)
7.3
(1.3)
(15.3)
3.6
24.2
35.4
(19.6)
3.8
(177.6)
0.3
—
0.3
$
(162.0) $
(15.3) $
(177.3)
129
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
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)
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 2020, we repurchased no shares of our Common Stock. 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, 2020, we had remaining authorization under the repurchase program authorized in July 2015 to
purchase approximately 19.1 million shares of our Common Stock.
130
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 11.7 million shares of options, restricted stock, SARs and restricted stock
units to certain key employees and directors. As of September 30, 2020, there were 1.2 million shares available to
be granted under this plan. In addition, there were 18.1 million shares available for grant under prior plans
approved by stockholders and plans assumed upon mergers and acquisitions. We do not expect to make any new
awards under those plans.
Our results of operations for the fiscal years ended September 30, 2020, 2019 and 2018 include share-based
compensation expense of $130.3 million, $64.2 million and $66.8 million, respectively. The total income tax benefit
in the results of operations in connection with share-based compensation was $33.2 million, $16.3 million and
$19.4 million, for the fiscal years ended September 30, 2020, 2019 and 2018, respectively.
Cash received from share-based payment arrangements for the fiscal years ended September 30, 2020, 2019
and 2018 was $32.4 million, $61.5 million and $44.4 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 are being 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
Stock Options and Stock Appreciation Rights
2019
3.1
27.7%
3.0%
4.1%
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 2020, 2019 and 2018.
131
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,
2020:
Outstanding at September 30, 2019
Exercised
Expired
Forfeited
Outstanding at September 30, 2020
Exercisable at September 30, 2020
Vested and expected to vest at September 30, 2020
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
(in millions)
Weighted
Average
Exercise
Price
33.32
24.84
38.21
26.59
35.26
35.27
35.26
3.0 $
3.0 $
3.0 $
12.9
12.9
12.9
Stock
Options
4,396,177 $
(840,433)
(93,691)
(5,756)
3,456,297 $
3,455,580 $
3,456,297 $
The aggregate intrinsic value of options exercised during the years ended September 30, 2020, 2019 and
2018 was $11.8 million, $44.5 million and $67.4 million, respectively.
As of September 30, 2020, there was less than $0.1 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 0.2 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, 2020:
Outstanding at September 30, 2019
Exercised
Expired
Outstanding at September 30, 2020
Exercisable at September 30, 2020
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
(in millions)
Weighted
Average
Exercise
Price
SARs
34,972 $
(15,343)
(2,647)
16,982 $
16,982 $
28.41
27.00
23.65
30.42
30.42
1.1 $
1.1 $
0.1
0.1
The aggregate intrinsic value of SARs exercised during the years ended September 30, 2020, 2019 and 2018
was $0.2 million, zero and $0.5 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 such as Cash Flow Per Share 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 zero depending upon the
terms of the individual grant. The employee grants generally vest in three years. Presently, other than
132
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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. In fiscal 2020, in connection with the WestRock Pandemic Action Plan we issued restricted stock
grants to satisfy certain annual bonus incentives. Those awards vested in October 2020 at 105% of target.
The table below summarizes the changes in unvested restricted stock during the fiscal year ended
September 30, 2020:
Unvested at September 30, 2019 (1)
Granted
Vested
Forfeited
Unvested at September 30, 2020 (1)
Weighted
Average
Grant Date Fair
Value
51.94
31.53
51.39
51.27
38.36
Shares/Units
3,645,538
4,446,175
$
(766,431)
(709,915)
$
6,615,367
(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 aggregate
outstanding grants to be attained at levels less than target. However, it is possible that the performance attained may vary.
There was approximately $81.6 million of unrecognized compensation cost related to all unvested restricted
shares as of September 30, 2020 that will be recognized over a weighted average remaining vesting period of 1.0
years.
The following table represents a summary of restricted stock shares granted in fiscal 2020, 2019 and 2018 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)
Shares of restricted stock granted for annual bonus
Share of restricted stock assumed in purchase accounting:
2020
2019
2018
49,236
39,792
23,285
—
1,149,592
45,964
869,065
652,465
432,655
152,595
889,030
2,486,249
407,300
682,264
—
259,695
354,512
—
Shares granted with a service condition (5)
Total restricted stock granted
—
4,446,175
742,032
3,673,445
—
1,116,111
(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 2020 for the fiscal 2017 Cash Flow Per Share were at 98.8% of target, therefore, the
remainder of the grant was forfeited. 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.
(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
133
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 2020 were valued
using a Monte Carlo simulation at $45.14 per share. The significant assumptions used in valuing these grants
included: an expected term of 3.0 years, an expected volatility of 27.5% and a risk-free interest rate of 1.3%. 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 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.
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 2020, 2019 and 2018 (in millions,
except shares):
Shares of restricted stock vested
Aggregate fair value of restricted stock vested
2020
766,431
29.6 $
2019
2,933,556
115.2 $
2018
697,717
46.1
$
The shares vested in fiscal 2020 reflect the vesting of the fiscal 2017 grants, with a Cash Flow Per Share
performance condition that vested at 98.8% of target, as well as certain shares with a service condition. 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.
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 2020, 2019 and 2018, employees purchased approximately 0.4 million, 0.4
million and 0.2 million shares, respectively, under the ESPP. We recognized $2.1 million, $1.2 million and $1.6
million of expense for fiscal 2020, 2019 and 2018, respectively, related to the 15% discount on the purchase price
allowed to employees. As of September 30, 2020, adjusted for the spinoff of our Specialty Chemicals business in
2016, approximately 1.6 million shares of Common Stock remained available for purchase under the ESPP.
134
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):
2020
September 30,
2019
2018
Numerator:
Net (loss) income attributable to common stockholders
Less: Distributed and undistributed income available to
participating securities
Distributed and undistributed (loss) income available to
common stockholders
$
(690.9) $
862.9 $
1,906.1
(0.1)
(0.1)
(0.2)
$
(691.0) $
862.8 $
1,905.9
Denominator:
Basic weighted average shares outstanding
Effect of dilutive stock options and non-participating securities
Diluted weighted average shares outstanding
259.2
—
259.2
256.6
2.5
259.1
255.5
4.3
259.8
Basic (loss) earnings per share attributable to common
stockholders
Diluted (loss) earnings per share attributable to common
stockholders
$
$
(2.67) $
3.36 $
7.46
(2.67) $
3.33 $
7.34
Options and restricted stock in the amount of 4.2 million, 1.3 million and 0.2 million common shares in fiscal
2020, 2019 and 2018, 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.
Note 23. Financial Results by Quarter (Unaudited)
Fiscal 2020
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Net sales
Gross profit
(Gain) loss on disposal of assets
Multiemployer pension withdrawal expense (income)
Restructuring and other costs
Goodwill impairment
Loss on extinguishment of debt
Income tax expense
Consolidated net income (loss)
Net income (loss) attributable to common stockholders
Basic earnings (loss) per share attributable to common
stockholders
Diluted earnings (loss) per share attributable to common
stockholders
$
$
$
$
$
$
$
$
$
$
$
$
135
(In millions, except per share data)
4,236.3 $
4,471.5
770.0 $
813.4
1.0 $
(10.4)
(2.0) $
—
9.7 $
56.5
— $
1,333.2
(0.6) $
(0.4)
(40.0)
(19.2) $
180.0 $ (1,154.5)
178.5 $ (1,156.0)
4,447.3 $
804.8 $
(5.6) $
0.9 $
16.4 $
— $
(0.5) $
(57.8) $
148.9 $
148.1 $
4,423.7 $
809.0 $
(1.3) $
— $
30.1 $
— $
— $
(46.5) $
139.5 $
138.5 $
0.54 $
0.57 $
0.69 $
(4.45)
0.53 $
0.57 $
0.69 $
(4.45)
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fiscal 2019
Net sales
Gross profit
(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
$
$
$
$
$
$
$
$
$
$
$
$
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(In millions, except per share data)
4,690.0 $
988.9 $
6.5 $
(1.7) $
— $
17.9 $
(3.2) $
(77.6) $
253.8 $
252.6 $
4,620.0 $
899.6 $
— $
— $
13.0 $
34.8 $
0.4 $
(47.2) $
161.9 $
160.4 $
4,327.4 $
781.8 $
(43.8) $
— $
— $
54.4 $
(1.9) $
(62.7) $
139.8 $
139.1 $
4,651.6
1,078.7
(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
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 2020 financial results by quarter (unaudited) table was
increased by $33.8 million pre-tax for our expected recovery and interest related to an indirect tax claim and
increased by $29.5 million pre-tax related to Hurricane Michael insurance proceeds received. Basic and diluted
earnings per share attributable to common stockholders were increased by approximately $0.18 and $0.17 per
share, respectively for these items. See “Note 18. Commitments and Contingencies — Indirect Tax Claim” and
“Note 7. Segment Information” for more information.
Consolidated net income in the third quarter of fiscal 2020 financial results by quarter (unaudited) table was
decreased by $31.6 million pre-tax for one-time COVID-19 recognition awards to our teammates who work in
manufacturing operations. Basic and diluted earnings per share attributable to common stockholders were each
decreased by approximately $0.09 per share.
Consolidated net loss in the fourth quarter of fiscal 2020 financial results by quarter (unaudited) table was
driven by a pre-tax non-cash goodwill impairment of $1,333.2 million, or $1,314.3 million after-tax, in our Consumer
Packaging reporting unit. The goodwill impairment contributed a loss of $5.06 per share each to the basic and
diluted loss per share attributable to common stockholders. See “Note 1. Description of Business and Summary
of Significant Accounting Policies — Goodwill and Long-Lived Assets” for more information.
Consolidated net income in the first quarter of fiscal 2019 financial results by quarter (unaudited) table was
decreased by $39.8 million pre-tax of direct expenses from Hurricane Michael (net of $20.0 million of insurance
proceeds) and an estimated $31.4 million pre-tax of lost production and sales. Additionally, consolidated net
income in the first quarter was decreased by $24.7 million pre-tax of expense for inventory stepped-up in purchase
accounting related to the KapStone Acquisition and increased by a $48.5 million pre-tax 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 pre-tax 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.
136
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors 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, 2020 and 2019, the related consolidated statements of operations, comprehensive (loss) income,
equity and cash flows for each of the three years in the period ended September 30, 2020, 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, 2020 and
2019, and the results of its operations and its cash flows for each of the three years in the period ended September
30, 2020, 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, 2020, 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 20, 2020
expressed an unqualified opinion thereon.
Adoption of New Accounting Standards
As discussed in Note 15 to the consolidated financial statements, the Company changed its method of accounting
for leases in 2020 due to the adoption of ASC 842, Leases.
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.
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
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.
137
Goodwill Impairment Assessment of the North American Corrugated and Consumer
Packaging Reporting Units.
Description of
the Matter
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. As of September 30, 2020, the Company’s
goodwill balances totaled $5,962.2 million, of which $3,533.0 million and $ 2,288.7 million related
to the North American Corrugated and Consumer Packaging reporting units, respectively. The
Company recorded an impairment of $1,333.2 million related to the Consumer Packaging
reporting unit.
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 of 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, long term growth rate, capital expenditures and tax rates, which are affected by
expectations about future market and 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 estimate 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 $206.7 million related to its uncertain tax positions at September 30, 2020.
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,
138
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 recorded 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.
/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 20, 2020
139
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors 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, 2020, 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, 2020, based on the COSO criteria.
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, 2020 and
2019, and the related consolidated statements of operations, comprehensive (loss) income, equity and cash flows
for each of the three years in the period ended September 30, 2020, and the related notes and our report dated
November 20, 2020, 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 Limitations 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.
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.
140
/s/ Ernst & Young LLP
Atlanta, Georgia
November 20, 2020
141
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 the 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,
2020. 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 2020 included
all of our operations. Based on our assessment, management believes that we maintained effective internal control
over financial reporting as of September 30, 2020. 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 2021 annual
meeting of stockholders and is incorporated herein by reference.
STEVEN C. VOORHEES,
Chief Executive Officer and President
WARD H. DICKSON,
Executive Vice President and Chief Financial Officer
November 20, 2020
142
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, 2020, 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, 2020, 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, 2020. 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.
143
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 11, 2020,
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 11, 2020. The foregoing certification was unqualified.
Item 9B. OTHER INFORMATION
Not applicable.
144
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, 2020:
Name
Steven C. Voorhees
Patrick E. Lindner
Jeffrey W. Chalovich
James B. Porter III
Ward H. Dickson
Robert B. McIntosh
Vicki L. Lostetter
Julia A. McConnell
Age
66
51
57
69
58
63
61
51
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
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. Mr. Porter is expected to retire effective December
31, 2020.
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.
145
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.
Julia A. McConnell has served as WestRock’s chief accounting officer since June 2020. Prior to joining the
Company, Ms. McConnell worked for Carter’s, Inc., where she served as vice president, international & supply
chain since 2018 and as vice president, finance and corporate controller from 2010 to 2019. Prior to joining
Carter’s, Ms. McConnell served as assistant controller for PepsiCo, Inc. from 2004 to 2010.
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 2021 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 2021 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 2021 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 2021 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 2021 annual meeting of stockholders and is incorporated herein by reference.
146
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 Operations for the years ended September 2020, 2019 and 2018
Consolidated Statements of Comprehensive (Loss) Income for the years ended September 2020,
2019 and 2018
Consolidated Balance Sheets as of September 30, 2020 and 2019
Consolidated Statements of Equity for the years ended September 30, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended September 30, 2020, 2019 and 2018
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
59
60
61
62
63
65
137
140
142
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.
147
Exhibit
Number
2.1
2.2
3.1
3.2
3.3
4.1(a)
4.1(b)
4.1(c)
4.1(d)
4.1(e)
4.1(f)
4.1(g)
INDEX TO EXHIBITS
Description of Exhibits
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).
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).
4.1(h)
Seventh Supplemental Indenture, dated as of July 1, 2015, to the Indenture dated as of July 15,
148
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)
4.3(c)
4.3(d)
4.3(e)
4.3(f)
4.4(a)
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).
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).
149
4.4(b)
4.4(c)
4.5(a)
4.5(b)
4.5(c)
4.5(d)
4.5(e)
4.6(a)
4.6(b)
4.6(c)
4.6(d)
4.6(e)
4.7(a)
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).
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).
150
4.7(b)
4.7(c)
4.7(d)
4.8(a)
4.8(b)
4.8(c)
4.8(d)
4.9
*10.1(a)
*10.1(b)
*10.1(c)
*10.1(d)
*10.2(a)
First Supplemental Indenture, dated August 24, 2017, to the Indenture dated as of 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, to the Indenture dated as of 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 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, to the 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).Second Supplemental Indenture, dated as of
May 20, 2019, to the 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 May 20, 2019).
Third Supplemental Indenture, dated as of June 3, 2020, to the 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 the WestRock’s Current Report on Form 8-K filed on June 3, 2020).
Description of the Registrant’s Common Stock Registered Pursuant to Section 12 of the Securities
Exchange Act of 1934 (incorporated by reference to Exhibit 4.9 of WestRock’s Annual Report on
Form 10-K for the year ended September 30, 2019).
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).
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).
*10.2(b)
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
151
*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)
*10.7(b)
*10.7(c)
*10.7(d)
*10.8
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).
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).
152
*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
*10.22
*10.23
10.24(a)
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-
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
153
10.24(b)
10.25(a)
10.25(b)
10.25(c)
10.25(d)
10.26(a)
10.26(b)
10.26(c)
10.26(d)
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 Coöperatieve 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 Coöperatieve 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).
Amendment No. 2, dated as of March 27, 2020, 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 Coöperatieve Rabobank, U.A. (incorporated by
reference to Exhibit 10.1 of WestRock’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2020).
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).
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
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).
154
10.26(e)
10.26(f)
10.27(a)
10.27(b)
10.27(c)
10.27(d)
10.28
10.29
10.30
10.31
@10.32
10.33
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).
Amendment No. 4, dated as of November 21, 2019, to the Credit Agreement, dated as of July 1,
2015, among WRKCo Inc., WestRock Company of Canada Corp./Compagnie WestRock du Canada
Corp., WRK Luxembourg S.à r.l., the other credit parties, 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 November 25, 2019).
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 (incorporated by reference to Exhibit
10.27(b) of WestRock’s Annual Report on Form 10-K for the year ended September 30, 2019).
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 Coöperatieve 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
WestRock’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017).
155
10.34(a)
10.34(b)
10.34(c)
10.34(d)
10.34(e)
10.35(a)
10.35(b)
10.35(c)
10.36(a)
10.36(b)
10.36(c)
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 (incorporated by reference to Exhibit
10.34(e) of WestRock’s Annual Report on Form 10-K for the year ended September 30, 2019).
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).
Amendment No. 2, dated as of November 21, 2019, to the Credit Agreement, dated as of March 7,
2018, among WRKCo Inc., the other credit parties, the lenders 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 25, 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).
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).
Amendment No. 1, dated as of November 21, 2019, to the Credit Agreement, dated as of April 27,
2018, among WRKCo Inc., WRK Luxembourg S.à r.l., WRK International Holdings S.à. r.l., Multi
Packaging Solutions Limited, WestRock Packaging Systems Germany GmbH, the other guarantors
and lenders thereto and Coöperatieve Rabobank U.A., New York Branch, as administrative agent
(incorporated by reference to Exhibit 10.3 of WestRock's Current Report on Form 8-K filed on
November 25, 2019).
10.37
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).
156
*10.38
*10.39
*10.40
*10.41(a)
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).
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).
*10.41(b)
Executive Consulting Agreement, dated as of October 31, 2020, by and between WestRock
Company and James B. Porter III.
*10.42
*10.43
*10.44
21
23
31.1
31.2
#32.1
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).
Amended and Restated WestRock Company 401(k) Retirement Savings Plan, effective as of July 1,
2020 (incorporated by reference to Exhibit 10.1 of WestRock’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2020).
WestRock Company 2020 Incentive Stock Plan.
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.
157
@ 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.
158
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 20, 2020
By:
/s/ STEVEN C. VOORHEES
Steven C. Voorhees
Chief Executive Officer and President
WESTROCK COMPANY
159
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
/s/ WARD H. DICKSON Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Ward H. Dickson
/s/ JULIA A. MCCONNELL Chief Accounting Officer
Julia A. McConnell
(Principal Accounting Officer)
Date
November 20, 2020
November 20, 2020
November 20, 2020
/s/ JOHN A. LUKE, JR.
John A. Luke, Jr.
Director, Non-Executive Chairman of the Board
November 20, 2020
November 20, 2020
November 20, 2020
November 20, 2020
November 20, 2020
November 20, 2020
November 20, 2020
November 20, 2020
November 20, 2020
November 20, 2020
November 20, 2020
November 20, 2020
/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/ TERRELL K. CREWS Director
Terrell K. Crews
/s/ RUSSELL M. CURREY Director
Russell M. Currey
/s/ SUZAN F. HARRISON Director
Suzan F. Harrison
/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
160
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 20, 2020
/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 20, 2020
/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.
Appendix A
Non-GAAP Measures and Reconciliations
We have included in the 2020 Annual Report financial measures that were not prepared in accordance with
generally accepted accounting principles in the United States (“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 presented by other companies.
Below, we define the non-GAAP financial measures we use, discuss the reasons that we believe this
information is useful to management and may be useful to investors and provide reconciliations of the non-GAAP
financial measures to the most directly comparable financial measures calculated in accordance with GAAP.
Adjusted Operating Cash Flow and Adjusted Free Cash Flow
WestRock uses the non-GAAP financial measures “Adjusted Operating Cash Flow” and “Adjusted Free Cash
Flow”. Management believes these measures provide WestRock’s board of directors, investors, potential
investors, securities analysts and others with useful information to evaluate WestRock’s performance relative to
other periods because it excludes certain cash restructuring and other costs, net of tax that management believes
are not indicative of the ongoing operating results of the business. We believe “Adjusted Free Cash Flow” provides
even greater comparability across periods by excluding capital expenditures. Set forth below is a reconciliation of
“Adjusted Operating Cash Flow” and “Adjusted Free Cash Flow” to “Net cash provided by operating activities”,
the most directly comparable GAAP measure to each of these non-GAAP financial measures for the periods below
(in millions):
Net cash provided by operating activities
$
2,070.7
$
2,310.2
$
1,931.2
$
1,463.8
$
1,223.3
Plus: Retrospective accounting policy adoptions
—
—
489.7
436.7
465.1
Fiscal
2020
Fiscal
2019
Fiscal
2018
Fiscal
2017
Fiscal
2016
Plus: Cash Restructuring and other costs, net of
income tax benefit of $19.4, $29.9, $14.5,
$36.4 and $70.4
Adjusted Operating Cash Flow
Less: Capital expenditures
Adjusted Free Cash Flow
59.8
2,130.5
102.7
2,412.9
(978.1)
(1,369.1)
41.3
2,462.2
(999.9)
99.5
2,000.0
(778.6)
139.3
1,827.7
(796.7)
$
1,152.4
$
1,043.8
$
1,462.3
$
1,221.4
$
1,031.0
Adjusted Segment EBITDA and Adjusted Segment EBITDA Margins
WestRock uses “Adjusted Segment EBITDA” and “Adjusted Segment EBITDA Margins”, along with other
factors, to evaluate our segment performance against our peers. Management believes these measures provide
our board of directors, investors, potential investors, securities analysts and others useful information to evaluate
WestRock’s performance relative to our peers. “Adjusted Segment EBITDA” on a consolidated basis is reconciled
below to “Net loss attributable to common stockholders” and at a segment level to “segment income”.
A- 1
Set forth below are reconciliations of “Segment EBITDA” and “Adjusted Segment EBITDA” to the most directly
comparable GAAP measure “Net loss attributable to common stockholders” (in millions):
Net loss attributable to common stockholders
$
(690.9)
Fiscal
2020
Adjustments: (1)
Less: Net income attributable to noncontrolling interests
Income tax expense
Other income, net
Loss on extinguishment of debt
Interest expense, net
Restructuring and other costs
Goodwill impariment
Multiemployer pension withdrawal income
Gain on sale of certain closed facilities
Non-allocated expenses
Segment income
Non-allocated expenses
Depreciation and amortization
Segment EBITDA
Adjustments
Adjusted Segment EBITDA
4.8
163.5
(9.5)
1.5
393.5
112.7
1,333.2
(1.1)
(15.6)
70.7
1,362.8
(70.7)
1,487.0
2,779.1
33.1
2,812.2
$
(1) Schedule adds back expense or subtracts income for certain financial statement and segment footnote
items to compute segment income, Segment EBITDA and Adjusted Segment EBITDA.
Set forth below are reconciliations of “Adjusted Segment Sales”, “Adjusted Segment EBITDA” and “Adjusted
Segment EBITDA Margins” to the most directly comparable GAAP measures, “segment sales” and “segment
income” (in millions, except percentages). “Segment EBITDA Margin” is calculated for each segment by dividing
that segment’s “Segment EBITDA” by “segment sales”. “Adjusted Segment EBITDA Margin” is calculated for each
segment by dividing that segment’s “Adjusted Segment EBITDA” by “Adjusted Segment Sales”.
Reconciliation for the Year Ended September 30, 2020
Corrugated
Packaging
Consumer
Packaging
Land and
Development
Corporate
/ Elim.
Consolidated
Segment / Net sales
Less: Trade sales
Adjusted Segment Sales
Segment income
Non-allocated expenses
Depreciation & amortization
Segment EBITDA
Adjustments
Adjusted Segment EBITDA
$
$
11,419.2
(373.5)
11,045.7
$
$
6,333.0
-
6,333.0
$
$
18.9
-
18.9
$
$
(192.3)
-
(192.3)
$
$
17,578.8
(373.5)
17,205.3
$
$
1,037.7
-
951.4
1,989.1
16.2
2,005.3
323.7
-
529.5
853.2
18.3
871.5
1.4
$
-
-
1.4
(1.4)
$
-
$
-
(70.7)
6.1
(64.6)
-
(64.6)
$
$
$
1,362.8
(70.7)
1,487.0
2,779.1
33.1
2,812.2
$
$
Segment EBITDA Margins
Adj. Segment EBITDA Margins
17.4%
18.2%
13.5%
13.8%
A- 2
Set forth below is a reconciliation of Packaging Solutions Sales to the most directly comparable GAAP
measure, “Net Sales” on a consolidated basis and by segment for fiscal 2020 (in millions, except percentage):
Packaging
Solutions
External
Paper
Changes in
Eliminations
Other
Segment /
Consolidated
Net Sales
Corrugated Packaging segment
Consumer Packaging segment
Land & Development segment
Eliminations
Total
Percent of sales
$
8,274.2
4,270.2
-
-
$
12,544.4
71%
Forward-looking Guidance
$
$
3,078.5
2,042.2
-
-
5,120.7
$
$
66.5
20.6
-
-
87.1
-
$
-
18.9
(192.3)
(173.4)
$
$
$
11,419.2
6,333.0
18.9
(192.3)
17,578.8
See “Forward-Looking Information” in our annual report on Form 10-K for a discussion of our use of forward-
looking statements.
In addition to forward looking statements related to fiscal 2020 that were included in our annual report on Form
10-K, this 2020 Annual Report includes additional forward-looking statements that were not included in our annual
report on Form 10-K (e.g., that we are well positioned for success over both the short term and long term, that we
have multiple levers to increase productivity that will help offset anticipated cost inflation and price pressures over
the next year and beyond, that our strategic capital projects are expected to add more than $125 million of EBITDA
in both fiscal 2021 and fiscal 2022, that we will continue to grow our participation in higher value packaging solutions
markets and reduce our participation in lower margin paper markets, that we will invest in expanding our
commercial, operating and innovation capabilities while building our workplace for the future, that as we execute
our disciplined capital allocation strategy in the near term we will focus on reducing our leverage and that we expect
our Adjusted Free Cash Flow to be greater than $1.0 billion for the sixth consecutive year).
This 2020 Annual Report includes forward looking guidance related to non-GAAP financial measures, such as
Adjusted Free Cash Flow. We are not providing forward-looking guidance related to GAAP financial measures or
reconciliations of forward-looking non-GAAP financial measures to the most directly comparable GAAP measure
because of the inherent difficulty in predicting the occurrence, the financial impact and the periods in which potential
non-GAAP adjustments may be recognized (e.g., acquisition and integration-related expenses, restructuring
expenses, asset impairments, litigation settlements, changes to contingent consideration and certain other gains
or losses). For the same reason, we are unable to address the probable significance of the unavailable information.
These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results
for the guidance period.
A- 3
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
P.O. 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
COMMON STOCK
Our Common Stock trades on the New
York Stock Exchange under the symbol
“WRK”.
As of December 4, 2020, there were
approximately 6,476 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.
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
The annual meeting of stockholders
will be held online at www.
virtualshareholdermeeting.com/
WRK2021 at 9 a.m., Eastern Standard
Time, Friday, January 29, 2021. Please
refer to the proxy statement for
information concerning the meeting.
STOCK PERFORMANCE
The graph below reflects the cumulative stockholder return on the investment of $100 on September 30, 2015, in WestRock Company’s
Common Stock (assuming the reinvestment of dividends) through September 30, 2020, 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. 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. ©2020 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
Peer Group
09/2015
$100
$100
$100
09/2016
$108.18
$115.43
$123.16
09/2017
$130.42
$136.91
$146.35
09/2018
$126.46
$161.43
$156.72
09/2019
$90.38
$168.30
$156.91
09/2020
$89.41
$193.80
$165.93
1 Peer Group includes: 3M Company, Avery Dennison Corp., Ball Corporation, Crown Holdings, Inc., Freeport McMoRan Inc., The Goodyear Tire & Rubber Company, Honeywell
International, Inc., International Paper Company, Kimberly-Clark Corporation, LyondellBasell Industries NV, Nucor Corporation, Packaging Corporation of America, PPG Industries Inc.,
Sherwin-Williams Company, United States Steel Corporation and Weyerhaeuser Company.
2 $100 invested on Sept. 30, 2015, in stock or index, including reinvestment of dividends. Fiscal year ending September 30.
2020
ANNUAL
REPORT
PLEASE RECYCLE
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