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2021
A N NUAL REP ORT
BOARD OF DIRECTORS
CORPORATE LEADERSHIP
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, Audit Committee, Compensation 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
DAVID B. SEWELL
President and Chief Executive Officer
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
DAVID B. SEWELL
President and Chief Executive Officer
PETER W. ANDERSON
Chief Supply Chain Officer
DONNA OWENS COX
Chief Communications Officer
AMIR A. KAZMI
Chief Information and Digital Officer
VICKI L. LOSTETTER
Chief Human Resources Officer
JULIA A. MCCONNELL
Senior Vice President and
Chief Accounting Officer
ROBERT B. MCINTOSH
Executive Vice President,
General Counsel and Secretary
TIMOTHY W. MURPHY
Senior Vice President and Treasurer
ALEXANDER PEASE
Executive Vice President
and Chief Financial Officer
BUSINESS LEADERSHIP
PETER C. DURETTE
President
Corrugated Packaging
PATRICK M. KIVITS
President
Consumer Packaging
PATRICK E. LINDNER
President
Commercial, Innovation
and Sustainability
JAIRO A. LORENZATTO
President
Brazil
SCOTT E. MACDONALD
President
Victory Packaging
JOHN L. O’NEAL
President
Global Paper
THOMAS M. STIGERS
President
Mill Operations
DAVID B. SEWELL
President and Chief Executive Officer
DEAR FELLOW STOCKHOLDERS:
This past fiscal year was certainly one for the record. The WestRock team delivered
record revenue while navigating through the challenges of the pandemic,
ransomware, inflation and supply chain disruptions. We successfully managed
through it all with a focus on partnering with our customers and helping them
navigate this changing environment.
In the midst of all of the events in fiscal 2021, I am pleased to report that our
business remains very strong. WestRock serves a wide range of end markets with
the broadest portfolio of packaging solutions in the industry, and this provides
us with greater opportunity and flexibility to focus on growing markets where
customers value our differentiation. We are more resilient because of our broad
mix of products and customers, and our unique capabilities and manufacturing
footprint enable us to serve our customers’ needs for primary, secondary and
tertiary packaging solutions.
FISCAL 2021 HIGHLIGHTS
Fiscal 2021 was a year of opportunities and challenges. Demand was very
strong across most of our end markets, and we delivered net sales for the year
of $18.7 billion and Adjusted Segment EBITDA of $3 billion.
We generated Adjusted Free Cash Flow of $1.5 billion, the sixth consecutive year in
which we generated more than $1 billion in Adjusted Free Cash Flow. We reduced
Adjusted Net Debt by $1.3 billion to $7.7 billion and returned to our targeted debt
ratio ahead of schedule.
Given our consistent free cash flow generation, we increased our dividend, raising it
20% in May and then again in November, for a total increase of 25% since February.
We also repurchased $122 million of stock, or 2.4 million shares.
During fiscal 2021, we completed our investments at our mills in Florence, South
Carolina, and Tres Barras, Brazil. We will continue to realize increasing benefits from
these investments in fiscal 2022 and beyond.
As I reflect on our performance in fiscal 2021, I am impressed by and grateful for
the resilience and dedication of the WestRock team. This team remained focused
on safety and worked together to provide the sustainable, fiber-based paper and
packaging solutions our customers need.
LEADING IN SUSTAINABILITY
We also advanced our sustainability efforts during fiscal 2021.
Many of our consumer brand customers face growing demands for sustainable
packaging. Others are seeking new ways to improve their supply chain and reduce
the materials in their packaging to increase efficiency. Regardless of the need,
WestRock is unique in our ability to provide a wide variety of sustainable packaging
solutions with the broadest portfolio of products in our industry. In addition, we
are investing in innovative materials science and design capabilities to ensure we
remain on the forefront in addressing this sustainable packaging demand.
As we help our customers with their sustainability goals, we are also focused on
improving the sustainability of our own operations. This year, WestRock confirmed
our commitment to reducing greenhouse gas emissions. We are working with
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the Science Based Targets initiative (SBTi) to set a new
greenhouse gas emissions reduction target that is aligned
with climate science.
Our overall sustainability performance is garnering
recognition. WestRock was recently named to the Dow
Jones Sustainability Index for North America for the second
consecutive year and was awarded the American Paper
and Packaging Association 2021 Sustainability Awards for
leadership in safety and sustainability. WestRock also earned
top marks in the Human Rights Campaign’s Corporate
Equality Index as a best place to work for LGBTQ Equality and
was named to FORTUNE magazine’s list of the World’s Most
Admired Companies for the sixth consecutive year.
LOOKING FORWARD
We have momentum entering fiscal 2022, and we are
well-positioned for record performance. We have strong
demand and great opportunities to grow our company
and improve our results while providing value to our
customers and shareholders. As we report on our results in
the future, we will do so as four new segments: Corrugated
Packaging, Consumer Packaging, Paper and Distribution.
This structure better aligns our reporting to the way we are
running our company and will provide greater clarity into
the performance of each area. I look forward to sharing
more about our progress in the future.
At WestRock, we are working to leverage the power of
the enterprise and the broadest portfolio of fiber-based
packaging solutions, and we are making the investments
needed to lead in sustainability and accelerate our
innovation platform. As we do this, we remain disciplined
in our capital allocation strategy and will look to use our
strong cash flow to create shareholder value.
On behalf of the board of directors and my WestRock
teammates, I want to thank you for your interest and
investment in WestRock. And a special thanks to the
incredible WestRock team for all that you do every day to
make WestRock successful.
The future is bright at WestRock, and I am looking forward
to the great things ahead for our Company.
Sincerely,
David B. Sewell
President and Chief Executive Officer
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The non-GAAP financial measures Adjusted Segment EBITDA, Adjusted Free Cash Flow and Adjusted Net Debt 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
For the fiscal year ended September 30, 2021
OR
!! TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 001-38736
WESTROCK COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(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, 2021 (based on the closing price
per share as reported on the New York Stock Exchange on such date), was approximately $13,705 million.
As of November 5, 2021, the registrant had 265,001,543 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 28, 2022 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.
[Reserved]
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 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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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3
20
31
31
33
33
34
34
35
56
59
130
130
131
131
132
133
133
133
133
134
134
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, sustainable 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
(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. 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 two 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; and Consumer Packaging, which consists of our
consumer mills, food and beverage and partition operations. Prior to the completion of our monetization program in
fiscal 2020, we had a third reportable segment, Land and Development, which previously sold real estate, primarily
in the Charleston, SC region. Following completion of the monetization of these assets, we ceased reporting the
results of the Land and Development segment as a separate segment.
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
the largest paper recyclers in North America and our recycling operations provide
believe we are one of
substantially all of the recycled fiber that we consume 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
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protective cartons to graphically brilliant point-of-purchase packaging. Our corrugated container plants serve local
customers and regional and large national accounts. Corrugated packaging is used to provide protective
packaging for shipment and distribution of food, paper, health and beauty, and other household, consumer,
commercial and industrial products. Corrugated packaging may also be graphically enhanced for retail sale,
particularly in club store locations. We provide customers with innovative packaging solutions to 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
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.
function,
Sales of corrugated packaging products to external customers accounted for 65.4%, 64.6% and 64.2% of our
net sales in fiscal 2021, 2020 and 2019, respectively. See “Note 7. Segment Information” of the Notes to
Consolidated Financial Statements, as well as Item 7. “Managements 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 34.6%, 35.3% and 35.7% of our
net sales in fiscal 2021, 2020 and 2019, respectively. See “Note 7. Segment Information” of the Notes to
Consolidated Financial Statements, as well as Item 7. “Managements 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% and 0.1% of our net sales in fiscal 2020 and 2019, respectively. See “Note 7. Segment
information. Following completion of the monetization of these assets, we ceased
Information” for additional
reporting the results of the Land and Development segment as a separate segment.
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. “Managements
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. Our overall fiber sourcing for
all of our mills is approximately 65% virgin and 35% recycled. See “Item 2. Properties” for additional information.
Recycled fiber prices and virgin fiber prices can fluctuate significantly.
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
that we incur production disruptions for recycled or virgin containerboard and
other suppliers in the event
5
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 coated and uncoated recycled
paperboard mills, we use primarily natural gas and electricity to generate steam used in the paper making process.
In our integrated kraft paper mills, we use natural gas, biomass, fuel oil and some 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. We experienced higher freight costs in fiscal 2021 following a decline 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 2021. 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 2021, 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 four-fifths 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 2021 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 188 customers who bought at least $1 million from each of our Corrugated
Packaging and Consumer Packaging segments in fiscal 2021. 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
important
responsibility, and our goal is to create a 100% safe work environment for our team members. Our safety strategy
focuses on 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.
teammates is our most
We are subject
to a broad range of
laws and regulations relating to
occupational health and safety, and our safety program includes measures required for compliance. We have
incurred, and will continue to incur, capital expenditures to meet our health and safety compliance requirements,
as well as to continually improve our safety systems. We believe 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.
federal, state and local
foreign,
The global impact of the COVID-19 pandemic (“COVID-19”) continues to evolve 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
(including due to new variants such as Delta), the actions taken to contain or mitigate its impact (including the
7
distribution and effectiveness of vaccines), and the direct and indirect economic effects of the pandemic and
related containment measures and government responses, among others.
On September 9, 2021, the Biden Administration announced a plan directing the Occupational Safety and
Health Administration (“OSHA”) to issue an emergency temporary standard (“ETS”) requiring all private employers
with 100 or more workers to mandate COVID-19 vaccinations or a weekly test for all employees. The ETS was
issued on November 5, 2021. On November 12, 2021, the U.S. Court of Appeals for the Fifth Circuit issued an
order staying enforcement and implementation of the ETS. We are assessing the anticipated requirements and
monitoring future developments. We cannot currently assess the impact it will have on our results of operations,
financial condition or cash flows and it is possible that the operational impact and cost of compliance with the ETS
may be substantial. See Item 1A. Risk Factors Our Business Has Been, and Will Continue to Be,
Impacted by the Outbreak of the COVID-19 Novel Coronavirus.
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.
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 and
disposal 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 numerous and more complex environmental programs
and regulations, but all of our manufacturing facilities have environmental compliance obligations. We have
incurred, and expect that we will continue to incur, significant capital, operating and other expenditures to comply
with applicable environmental laws and regulations, including, for example, projects to replace and/or upgrade our
air pollution control devices, wastewater treatment systems, and other environmental infrastructure. Changes in
these laws, as well as litigation relating to these laws, could result in more stringent or additional environmental
compliance obligations for the Company that may require additional 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 contamination exists, 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 impact our
results of operations, financial condition or cash flows.
8
We believe that we can assert claims for indemnification pursuant to existing rights we have under certain
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 $21 million for capital expenditures during fiscal 2022 in
connection with matters relating to environmental compliance.
is possible that our capital expenditure
assumptions and project completion dates may change, and our projections are subject to change due to items
such as the finalization of ongoing engineering projects or changes in environmental laws and regulations.
It
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 seven to eight million tons of paper
and packaging from landfills where it would otherwise degrade and release greenhouse gases in the form of
methane. 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, we established a goal to reduce our Scope 1 and Scope 2 greenhouse gas emissions per ton of
production by 20% from a 2015 baseline by 2025. As of our September 30, 2020 reporting, we achieved a 14%
reduction of greenhouse gas (“GHG”) per ton of production and an absolute reduction of 22% from our baseline.
We have accomplished GHG reductions in our business primarily by displacing coal with natural gas and investing
in new biomass boilers at our Covington, VA and Demopolis, AL mills. In June 2021, the Company announced that
it will be working with the Science Based Targets initiative (“SBTi”) to set a new GHG emissions reduction target
that is aligned with current climate science.
Our Executive Leadership Team is actively involved in setting and executing our sustainability strategy,
including climate-related initiatives such as setting a science-based GHG target. Board-level oversight of climate-
related and other corporate sustainability matters resides with the Nominating & Governance Committee of the
Company’s Board of Directors. The corporate sustainability team works with the Company’s operational and
functional groups to incorporate sustainability and climate objectives into operations. The team also oversees the
development of our sustainability report, which includes data on performance against climate-related targets. The
corporate sustainability team reports to the President, Innovation, Commercial & Sustainability, who reports to the
Chief Executive Officer.
Addressing issues related to climate change presents opportunities for our business. For example, we produce
renewable energy and generate renewable energy credits (“RECs”) at our integrated kraft mills. We have sold
RECs in the past and may sell them in the future. The RECs we generate are flexible, market-based tools that
support the renewable energy market. 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 supplies and prices, which may fluctuate during prolonged periods of
9
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 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 reducing
GHG emissions 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 programs. 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 and to which the United States formally rejoined in February 2021.
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. 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®.
WestRock is an example of
the circular economy in action,
from the renewable resources we use to
manufacture our paperboard, to the recyclable packaging we make for our customers. Our recycling operations
bring the process full circle by collecting recovered fiber that is used by our own paper mills and by others to
produce new paper products. We have a long history of recycling and are one of the largest recyclers in the paper
industry. We recover approximately seven to eight million tons annually of paper and other recyclable materials
that might otherwise go into landfills.
All of our North American virgin fiber sourcing regions are certified to the Sustainable Forestry Initiative (SFI®)
Fiber Sourcing standard. Our forestland in Brazil
is certified to the Brazilian Forest Certification Programme
(CERFLOR®), the Programme for the Endorsement of Forest Certification (PEFC®) and the Forest Stewardship
Council (FSC®). To provide traceability for the virgin fiber used in our operations, we have certified more than 95
percent of our wholly owned, fiber-based manufacturing facilities to three, internationally recognized chain-of-
custody standards: SFI®, PEFC® and FSC®.
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WestRock has been recognized for our sustainability efforts through, among other things, industry award
programs and inclusion in the Dow Jones World and North American Sustainability Indices and 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. Our portfolio also includes exclusive rights to substantial proprietary packaging system technology in
the U.S. and 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, 2021, we employed approximately 49,900 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 49,900 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 26% of those employees covered under CBAs are operating
under agreements that expire within one year and approximately 16% 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 65 of our U.S. operating locations and approximately 8,900 of our employees.
See Item 1A. Risk Factors We May Be Adversely Impacted By Work Stoppages and Other Labor
Relations Matters.
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. 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. We invested in roles and
11
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.
Nevertheless, the market for both hourly workers and professional workers was particularly challenging in
fiscal 2021 and we expect that the market for both hourly workers and professional workers will remain challenging
at least through fiscal 2022. See Item 1A. Risk Factors We Operate in a Challenging Market for Talent and
May Fail to Attract, Motivate, Train and Retain Qualified Personnel, Including Key Personnel.
Culture
WestRock’s culture is grounded in our values:
Integrity – being honest and ethical, doing the right thing
!
! Respect – treating one another with respect, and earning the respect of teammates, customers, suppliers
!
!
through our actions
Accountability – being responsible for our work and to our team. Collectively contributing to the success of
our company and our customers
Excellence – striving to perform at the highest levels – for ourselves, our customers, investors and
communities
At the core of our employee listening systems is our bi-annual engagement survey, which is augmented with
employee pulse checks after hire and promotion, and exit interviews/surveys. These pulse checks/surveys enable
us to gather feedback directly from our workforce to inform our programs and employee needs globally.
Approximately 86% of team members globally participated in our fiscal 2021 WestRock engagement survey, which
covers topics such as company strategy and direction, leadership, inclusion, safety, culture, pay and benefits, and
learning and development.
Safety
The health and safety of our teammates is our most important responsibility, and our goal is to create a 100%
safe work environment for our team members. 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.
We implemented a wide variety of measures to protect the health and well-being of our employees, suppliers,
and customers during the COVID-19 pandemic. We made substantial modifications to travel policies and
implemented office and manufacturing protocols to include quarantine, cleaning and sanitizing, and childcare
support. We reconfigured manufacturing processes and lines to create distance and improved ventilation, where
needed. We also provided on-site flu and COVID vaccination clinics and extended our existing Employee
Assistance Program and other community resources to help with personal and family care. See Item 1. Business
Governmental Regulation Health & Safety for more information on 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, 2021, 21% of our global workforce was comprised of females and 33% of our U.S. based
workforce was comprised of people of color. Our board of directors includes four females (representing 36% of
directors) and one person of color (representing 9% of directors). We have implemented a multi-year Diversity,
Inclusion, Equity and Belonging action plan that we expect will increase our workforce diversity, advance inclusion,
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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. For
instance, in October 2020, management recommended, and the board of directors approved, several actions
aimed at increasing our diversity and advancing our inclusive environment. One program that has contributed to
our overall progress involves the internal and external posting of our open positions and the inclusion of female
and racially or ethnically diverse candidates on our recruitment slates. In addition, we adopted an approach where
new management-supported director nominees and chief executive officers recruited from outside WestRock are
chosen by the board of directors. We set a four-year goal for gender and ethnic representation that aligns with our
long-term expectations for creating a truly diverse and inclusive organization – one that reflects our customers and
communities.
We included a diversity, inclusion, equity and belonging modifier in our fiscal 2021 short-term incentive plan for
our top 12 executives. The modifier was tied to the achievement of certain performance measures under our
Diversity, Inclusion, Equity and Belonging action plan. We expect the diversity, inclusion, equity and belonging
modifier to be applied to approximately 100 of our top executives and leaders in fiscal 2022.
In collaboration with organizations, such as the Executive Leadership Council, Pathways and Signature, we
are providing external development opportunities for our diverse talent. To connect and develop team members
within WestRock, we support highly engaged resource groups for early in career, women, racial and ethnic
minorities, military, people with different abilities, or who identify as LGBTQI+, where team members can go for
support, networking, and community-building.
We conduct pay equity analyses annually in the U.S., Great Britain and France to help identify any
unsupported distinctions in pay between team members of different races, gender and/or age, as permitted by
local law. We adjust base pay, where appropriate.
Talent Attraction, Retention and Development
During fiscal 2021, we continued investing in people, programs and systems to meet the increased talent
demand in a dynamic marketplace. We have expanded our relationships with Historically Black Colleges and
Universities, the National Association of Manufacturers and other partners and associations. To retain critical
operational talent in hyper labor markets and businesses, we have restructured work schedules, updated work
rules, and provided retention bonuses, where needed.
To ensure team members get off to a fast start, we provided new employee orientations to over 10,000 new
hires in fiscal 2021, covering a range of topics including company values, culture, diversity and inclusion and
Standards of Business Conduct. In fiscal 2021, WestRock launched our on-line learning library with over 1,000
courses in five languages, and with over 200 playlists by topic area or experience/skill set.
We invest in our senior leadership through a leadership excellence program, and developed new front-line
team members participate in an
management pilot programs to be launched in fiscal 2022. Commercial
assessment and development workshop which focuses on the capabilities needed today and tomorrow, ensuring
we are able to anticipate and meet our customers’ changing requirements. We continue to invest in our technical
development curriculum with a focus on building the best technical, engineering, operational talent.
Focused on our core company values, all team members complete required learning programs like Standards
of Business Conduct, Privacy, and preventing harassment courses.
International Operations
Our operations outside the U.S. are conducted through subsidiaries located in Canada, Mexico, South
America, Europe, Asia and Australia. Sales attributable to non-U.S. operations were 18.5%, 17.7% and 18.2% of
our net sales in fiscal 2021, 2020 and 2019, 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.
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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 any
amendments thereto) 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 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 (including due to new variants such as Delta), the actions taken to contain or mitigate its
impact (including the distribution and effectiveness of vaccines), and the direct and indirect economic
effects of the pandemic and related containment measures and government responses, among
others;
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
calendar 2021 that we will be able to use to reduce our outstanding indebtedness;
our expectation to pay the deferred employment taxes under the CARES Act as required, 50% by
December 2021 and the remaining 50% by December 2022;
that we are continuing to focus on the protection, safety and well-being of our teammates during
COVID-19 and continuing to match our supply with our customers’ demand;
the confidence we have in our business and our ability to generate strong cash flows;
that in the first quarter of fiscal 2022, we expect a sequential decline in net sales and earnings from
the fourth quarter of fiscal 2021 reflecting the normal season sequential volume declines in many of
our businesses and scheduled mill maintenance outages;
that in the first quarter of fiscal 2022, we expect lower volume with three fewer shipping days during
the first quarter of fiscal 2022, although in line with shipping days in the first quarter of fiscal 2021;
that in the first quarter of fiscal 2022, we expect that due to delays in mill maintenance in fiscal 2021
for items such as COVID-19 and the Ransomware Incident, we expect approximately 200,000 tons of
maintenance downtime, the peak maintenance outage period for fiscal 2022;
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that in the first quarter of fiscal 2022, we expect sequential cost inflation driven primarily by higher
natural gas, transportation, and recycled and virgin fiber costs along with increased health insurance
costs prior to the annual reset of employee deductibles. However, we expect the flow through of the
previously published price increases we are implementing to more than offset inflation;
that in fiscal 2022, we expect solid demand across most of our end markets and continued flow
through of the previously published price increases;
that in fiscal 2022, we expect record sales and operating profit despite continued commodity input cost
inflation and productivity unavoidably affected by supply chain challenges and higher labor costs that
may persist through the fiscal year;
that in fiscal 2022, we expect the implementation of previously published price increases will outpace
inflation despite our expectation for higher
recycled fiber, energy, virgin fiber, chemical and
transportation costs;
that in fiscal 2022, we expect to benefit from the fiscal 2021 completion of strategic investments such
as the new paper machine at our Florence, SC mill and our Tres Barras mill upgrade;
that in fiscal 2022, we expect our planned mill maintenance outage schedule will be approximately
100,000 tons higher than in fiscal 2021;
the possibility that the operational impact and cost of compliance with the ETS may be substantial;
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;
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;
that we have sold RECs in the past and may sell them in the future;
the Company will be working with the Science Based Targets initiative to set a new GHG emissions
reduction target that is aligned with current climate science;
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;
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;
that responses to climate change may result in regulatory risks as new laws and regulations aimed at
reducing GHG emissions come into effect, that these rules and regulations could take the form of cap-
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and-trade, carbon taxes or GHG reductions mandates for utilities that could increase the cost of
purchased electricity and that new climate rules and regulations also may result in higher fossil fuel
prices or fuel efficiency standards that could increase transportation and other operating costs;
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;
that
our belief
the costs associated with investigations and remediation projects 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 damages at these or other sites in the
future, could impact our results of operations, financial condition or cash flows;
our belief that we can assert claims for indemnification pursuant to existing rights we have under
certain purchase and other agreements in connection with certain remediation sites and that we 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, that such obligations may include carbon taxes, the requirement
to purchase GHG credits, or the need to acquire carbon offsets and that 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;
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;
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top executives and leaders in fiscal 2022;
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as our business evolves, we will remain focused on having the right human capital capabilities,
systems and processes in place to support our strategy;
that we expect
that
challenging at least through fiscal 2022;
the market
for both hourly workers and professional workers will remain
our expectation that 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;
our expectation that we will continue to incur, significant capital, operating and other expenditures to
comply with applicable environmental laws and regulations, including, for example, projects to replace
and/or upgrade our air pollution control devices, wastewater
treatment systems, and other
environmental infrastructure;
our expectation that changes in environmental laws, as well as litigation relating to these laws, could
result in more stringent or additional environmental compliance obligations for the Company that may
require additional capital investments or increase our operating costs;
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that we may form additional joint ventures;
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our belief that of the 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;
our belief that we are adequately reserved for the PIUMPF withdrawal liabilities, including liabilities
associated with PIUMPF’s 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 to continue to evaluate potential acquisitions similar to those completed in the past,
although the size of individual acquisitions may vary;
our belief that our strong balance sheet and cash flow provide us the flexibility to continue to invest to
sustain and improve our operating performance;
our 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 it is likely that we will engage in future restructuring activities;
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 in fiscal 2021, including the paper machine
at our Florence, SC mill and the Tres Barras mill upgrade project, we expect capital expenditures of
$1.0 billion in fiscal 2022; that at this level of capital investment, we are confident that we will continue
in the appropriate safety, environmental and maintenance projects while also making
to invest
investments to support productivity and growth in our business; but that 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;
our estimation that we will invest approximately $21 million for capital expenditures during fiscal 2022
in connection with matters relating to environmental compliance;
that based on 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 and that foreign and state
net operating losses and credits will be used over a longer period of time;
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 that our fiscal
2022 cash tax rate will be slightly lower than our income tax rate. Our cash tax rate in fiscal 2023 and
2024 will be driven slightly higher than our income tax rate primarily due to the absence of certain
nonrecurring tax credits, the expected release of a tax reserve and the reduction in capital investments
including the timing of depreciation on our qualifying capital investments as allowed under the Tax
Cuts and Jobs Act;
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that, based on current facts and assumptions, we expect to contribute approximately $25 million to our
U.S. and non-U.S. pension plans in fiscal 2022;
that, based on current
including future interest rates, we estimate that
minimum pension contributions to our U.S. and non-U.S. pension plans will be in the range of
approximately $23 million to $24 million annually in fiscal 2023 through 2026;
facts and assumptions,
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
long-term debt and other corporate actions for the
activities, repayments of current portion of
facilities,
foreseeable future from cash generated from operations, borrowings under our credit
proceeds from our accounts receivable sales agreements, 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, 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;
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, 2021;
that we expect to continue to incur significant costs as we enhance our data security and take further
steps to prevent unauthorized access to, or manipulation of, our systems and data and that despite our
efforts, we may not have identified and remediated all of the potential causes of the Ransomware
Incident (as hereinafter defined) and similar incidents may occur in the future;
our longer!term capital allocation priorities, which include (i) investing in our business, (ii) consistently
growing our dividend, (iii) maintaining our investment grade profile, (iv) pursuing tuck!in acquisitions
that align to our strategy and generate attractive returns, and (v) opportunistic share repurchases;
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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 our exposure with respect to certain guarantees we have made to be less than $50
million;
that while we are unable to estimate our maximum exposure under operating leases because it is
dependent on potential changes in the tax laws, we believe our exposure related to guarantees would
not have a material impact on our results of operations, financial condition or cash flows;
our expectation that we will not issue additional stock appreciation rights (“SAR” or “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 $31.5 million in
the next twelve months due to expiration of various statutes 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 risk, energy price risk, rates of return,
investments in derivative
instruments, and the risk of counterparty nonperformance, and expected factors affecting those risks,
including our exposure to foreign currency rate fluctuations;
the risk of
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 among others: our ability to respond effectively to
the impact of COVID-19; our ability to achieve benefits from acquisitions and the timing thereof, including
synergies, performance improvements; our ability to successfully implement capital projects; adverse legal,
reputational and financial effects on the Company resulting from cyber incidents and the effectiveness of the
Company’s business continuity plans during a ransomware incident; the level of demand for our products; our
ability to successfully identify and make performance and productivity improvements; anticipated returns on our
capital
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
investments;
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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 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,
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, claims or
other proceedings or dispute resolutions on our results of operations, financial condition or cash flows; the scope,
costs, timing and impact of any restructuring of our operations and corporate and tax structure; income tax rates,
future deferred tax expense and future cash tax payments; future debt repayment; the occurrence of severe
weather or natural disasters or other unanticipated problems, such as labor difficulties, equipment failure or
unscheduled maintenance and repair, which could result in operational disruptions, including those related to
COVID-19; and other factors that are discussed in Item 1A. Risk Factors.
joint ventures, dispositions and other strategic actions;
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 the past 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. The COVID-19 pandemic has affected our operational and financial performance to
varying degrees and the extent of its effect on our operational and financial performance will continue to depend on
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future developments, which are highly uncertain and cannot be predicted with confidence, including the duration,
scope and severity of the pandemic (including due to new variants, such as Delta), the actions taken to contain or
mitigate its impact (including the distribution and effectiveness of vaccines), and the direct and indirect economic
effects of the pandemic and related containment measures and government responses, 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, increased consumption of recycled fiber, including through
additions 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 2021, we
experienced periods of increased recycled fiber costs due primarily to market demand and availability.
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, wet weather conditions. 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. In fiscal 2021, the price of the natural gas that we consume in our manufacturing operations
increased significantly compared to the prior year period. Energy costs have increased, and in the future could
increase, our operating costs and have made, and in the future could 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. In fiscal 2021, we experienced significantly higher freight costs compared to
freight costs incurred in fiscal 2020 and fiscal 2019. High transportation costs have made, and in the future 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 customers, may impact competitive dynamics. If our
competitors are more successful than we are with respect to any key competitive factor, our results of operations,
cash flows and financial condition, and the trading price of our Common Stock, could be adversely affected.
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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. COVID-19 has impacted our operations and financial
performance to varying degrees 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 (including due to new variants such as Delta), the
actions taken to contain or mitigate its impact (including the distribution and effectiveness of vaccines), and the
direct and indirect economic effects of
the pandemic and related containment measures and government
responses, 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 that in turn may impact us.
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, and may experience in the future, lower overall demand for certain of our products
due to economic uncertainty and changing consumer behaviors driven by COVID-19 or reduced demand
due to our customers’ supply chain issues. For example, we experienced softer demand in the commercial
print,
the
pandemic. In addition, our net sales, primarily in the last half of fiscal 2020, were negatively impacted by
COVID-19.
food service, cosmetics and spirits markets during certain periods of
industrial,
tobacco,
• We have experienced and may experience in the future higher supply chain costs and tight labor markets,
in part, due to the impacts of COVID-19. In addition, 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, or our customers may experience similar constraints that in turn may impact us.
• 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,
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.
including because of
• 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, as well as the potential for staffing limitations.
Our business has been, and will continue to be, impacted by COVID-19 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
Completing Divestitures
in Making and Integrating Mergers, Acquisitions and Investments, and
We have completed a number of mergers, acquisitions, investments and divestitures in the past 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;
including integrating information
integrating acquired businesses and personnel
technology systems and operations across different cultures and languages, and addressing the
economic, political and regulatory risks associated with specific countries;
into our business,
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;
incurring substantial indebtedness to finance an acquisition or investment;
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 May Incur Business Disruptions
The operations at our manufacturing facilities have in the past and may in the future 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,
including COVID-19, or other similar
occurrences;
tornados and droughts, and pandemics,
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;
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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, including those associated with implementation of the OSHA ETS.
For example, operations at several of our facilities located in the south and southeastern U.S. have been
interrupted in recent years by hurricanes and severe winter weather, resulting in, among other things, lost mill
production.
Business disruptions have impaired, and may in the future 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
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, certain states and local governments have adopted laws banning single-use paper bags or
charging 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. Our capital expenditures for particular capital projects could be
higher than we anticipated, we may experience unanticipated business disruptions and/or we may not achieve the
desired benefits from the capital projects, any of which could adversely affect our results of operations, cash flows
and financial condition, and the trading price of our Common Stock. In addition, disputes between us and
contractors who are involved with implementing capital projects could lead to time-consuming and costly litigation.
We are Exposed to Risks Related to International Sales and Operations
We derived 18.5% of our net sales in fiscal 2021 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
transfer pricing.
We are also subject to taxation in the U.S. and numerous non-U.S. jurisdictions, and have several ongoing
audit examinations covering multiple years with various tax authorities. We base our tax returns on our
interpretation of tax laws and regulations in effect; however, governing tax bodies may disagree with certain of our
tax positions, which could result in a higher tax liability.
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:
•
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;
•
•
•
•
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
obligations as partners; and
their
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.
25
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
We have large customers, the loss of which could adversely affect our 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
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, manipulate data or disrupt our operations. Despite our security
design and controls, and those of our third-party providers, we have in the past experienced, and may in the future
become subject to, system damage, disruptions or shutdowns due to any number of causes, including cyber-
attacks, data breaches, employee error or malfeasance, power outages, telecommunication or utility failures,
systems failures, service provider failures, natural disasters or other catastrophic events. For example, in January
2021, we detected a ransomware attack impacting certain of our systems (the “Ransomware Incident”). In
response, we proactively shut-down a number of our systems, which impacted certain of our operations, including
our ability to produce and ship paper and packaging. Due to these actions, our mill system production was
approximately 115,000 tons lower than planned for the quarter ended March 31, 2021 and we estimate the pre-tax
income impact of the lost sales and operational disruption of this incident, as well as ransomware recovery costs,
at approximately $80 million. In response to the Ransomware Incident, we accelerated information technology
investments that we had previously planned to make in future periods in order to further strengthen our information
security and technology infrastructure. As a result, we have incurred and expect to continue to incur, significant
costs as we enhance our data security and take further steps to prevent unauthorized access to, or manipulation
of, our systems and data. Despite these efforts, we may not have identified and remediated all of the potential
causes of the Ransomware Incident and similar incidents may occur in the future. In particular, the Ransomware
Incident may embolden individuals or groups to target our systems.
The cyber-security-related vulnerabilities that we face may also 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 like
those we suffered in connection with the Ransomware Incident 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
26
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 Operate in a Challenging Market for Talent and 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 workers with more tenure and experience retire. The market for
both hourly workers and professional workers was particularly challenging in fiscal 2021. The market for hourly
workers was, and remains, very competitive. In certain locations where we operate, the demand for labor has
exceeded the supply of labor, resulting in higher costs. Despite our focused efforts to attract and retain employees,
including by offering higher levels of compensation in certain instances, we experienced attrition rates within our
hourly workforce in fiscal 2021 that exceeded historical levels and we incurred higher operating costs at certain of
our facilities in the form of higher levels of overtime pay. The market for professional workers was, and remains,
similarly challenging. Many of our professional workers continue to work from home as part of our COVID-19
protocols and, although in most instances we expect to offer flexible working arrangements in the future, we may
experience higher levels of attrition within our professional workforce. In addition, in September 2021, President
Biden issued an executive order directing the Occupational Safety and Health Administration to create rules
requiring U.S. employers with 100 or more employees to require COVID-19 vaccinations or weekly employee
testing before coming to work. OSHA issued the ETS on November 5, 2021. On November 12, 2021, the U.S.
Court of Appeals for the Fifth Circuit issued an order staying enforcement and implementation of the ETS.
Implementation of these rules could cause us to experience additional challenges in retaining our employees. We
expect that the market for both hourly workers and professional workers will remain challenging at least through
fiscal 2022. 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 operating 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 these employees, particularly during a challenging market for attracting and retaining employees, could
adversely affect our results of operations, cash flows and financial condition, and the trading price of our Common
Stock may be adversely impacted.
We May Be Subject to Physical, Operational and Financial Risks Associated with Climate Change
Our physical assets and infrastructure may be subject to risks from volatile and damaging weather patterns.
For example, extreme, weather-related events, such as hurricanes, tornados, extreme storms, wildfires, and
floods, could result in physical damage to our facilities and lost production. Unpredictable weather patterns also
may result in supply chain disruptions and increased material costs. The ability to harvest the virgin fiber used in
our manufacturing operations may be limited, and prices for this raw material may fluctuate, during prolonged
periods of heavy rain or during tree disease or insect epidemics that may be caused by variations in climate
conditions. Other climate-related business risks that we face include risks related to the transition to a lower-
carbon economy, such as increased prices for certain fuels, including natural gas; the introduction of a carbon tax;
increased regulations; and more stringent and/or complex environmental and other permitting requirements. 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.
27
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;
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;
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 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. For example, the
Biden Administration has proposed significant changes to the U.S. tax laws, including an increase to the federal
corporate tax rate, limiting deductions where certain conditions exist, and several proposals that would have the
combined effect of increasing the U.S. taxation on profits earned outside the U.S. 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.
We Have Had Significant Levels of Indebtedness in the Past and May Incur Significant Levels of
Indebtedness in the Future, Which Could Adversely Affect Our Financial Condition and Impair Our
Ability to Operate Our Business
At September 30, 2021, we had $8.2 billion of debt outstanding compared to $9.4 billion at September 30,
2020. 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. In March 2021, the U.K. Financial Conduct Authority announced that all LIBOR
settings will either cease to be provided by any administrator or no longer be representative immediately after
December 31, 2021 for sterling, euro, Swiss franc and Japanese yen settings, and the one-week and two-month
28
U.S. dollar settings and immediately after June 30, 2023 for the remaining U.S. dollar settings. In instances where
we have not yet incorporated LIBOR-replacement provisions into the credit agreements governing our variable rate
debt
that uses LIBOR as an interest rate benchmark, we will need to do so before June 30, 2023. The
discontinuation and 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 and replacement, including that any benchmark replacement may not
be the economic equivalent of LIBOR or not achieve market acceptance similar to LIBOR, 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
indebtedness. These
may restrict us from, among other things, disposing of assets and incurring additional
restrictions may limit our flexibility to respond to changing market conditions and competitive pressures.
Credit Rating Downgrades Could Increase Our Borrowing Costs or Otherwise Adversely Affect Us
Some of our outstanding indebtedness has received credit ratings from rating agencies. Our credit ratings
could change based on, among other things, our results of operations and financial condition. Credit ratings are
subject to ongoing evaluation by credit rating agencies and may be lowered, suspended or withdrawn entirely by a
rating agency or placed on a “watch list” for a possible downgrade or assigned a “negative outlook”. Actual or
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, 2021, the carrying value of our goodwill and intangible assets was $9.3 billion. We review
the carrying value of our goodwill for impairment annually, or more frequently when impairment indicators exist.
The impairment test requires us to analyze a number of factors and make estimates that require judgment. In fiscal
2021, our reporting units had fair values that exceeded their carrying values by more than 20% each. 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. In fiscal 2020, we recorded a pre-tax non-cash goodwill impairment of approximately $1.3 billion in
our Consumer Packaging reporting unit.
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.
29
We May Utilize Our Cash Flow or Incur Additional Indebtedness to Increase our Investment in Gondi, S.A.
de C.V. (Grupo Gondi) or We May Decrease 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 other shareholders of Grupo Gondi agreed to future put and call options with
respect to the equity interests in the joint venture held by each party. We own 32.3% of the joint venture. Pursuant
to the option agreement, our joint venture partners may call our 32.3% equity interest at a predetermined price
between October 1, 2021 and April 1, 2022. At any time after April 1, 2022, we may elect to sell, and upon such
election our joint venture partners will be obligated to buy, all of our equity interest at a price as determined under
the provisions of the agreement. Any arrangement pursuant to which we decrease our ownership in Grupo Gondi
would reduce the geographical diversity of our business and may limit our growth opportunities in Mexico. Any
arrangement pursuant
to which we increase our ownership in Grupo Gondi may require us to dedicate a
substantial portion of our cash flow to satisfy our payment or investment obligations, which may reduce the amount
of funds available for our operations, capital expenditures and corporate development activities or require us to
incur additional indebtedness or issue equity securities.
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. We submitted formal notification to withdraw from MEPPs in the past and have
recorded withdrawal liabilities, including an estimate of our portion of PIUMPF’s accumulated funding deficiency.
We may withdraw from other MEPPs in the future. At September 30, 2021, we had $247.1 million of withdrawal
liabilities, including liabilities associated with PIUMPF’s accumulated funding deficiency demands. In July 2021,
PIUMPF filed suit against us in the U.S. District Court for the Northern District of Georgia claiming the right to
recover our pro rata share of the pension fund’s accumulated funding deficiency. The impact of increased
contributions,
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.
future funding obligations or future withdrawal
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 to
comply with applicable environmental laws and regulations. Our environmental expenditures include those related
to air and water quality, waste disposal and the cleanup of contaminated soil and groundwater, including situations
where we have been identified as a PRP. Because environmental laws and regulations are constantly evolving, we
will continue to incur costs to maintain compliance and our compliance costs could increase materially. Future
compliance with existing and new laws and requirements has the potential to disrupt our business operations and
may 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
30
future incur additional or increased capital, operating and other expenditures from changes due to new or
liabilities,
increased climate-related and other environmental requirements. We could also incur substantial
including fines or sanctions, enforcement actions, natural resource damages claims, cleanup and closure costs,
and third-party claims for property damage and personal injury under environmental and common laws.
The Foreign Corrupt Practices Act of 1977 and local anti-bribery laws, including those in Brazil, China,
Mexico, India and the United Kingdom (where we maintain operations directly or through a joint venture), prohibit
companies and their intermediaries from making improper payments to government officials for the purpose of
influencing official decisions. Our internal control policies and procedures, or those of our vendors, may not
adequately protect us from reckless or criminal acts committed or alleged to have been committed by our
employees, agents or vendors. Any such violations could lead to civil or criminal monetary and non-monetary
penalties and/or could damage our reputation.
We are subject
to a number of
labor and employment 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, among others, the California Consumer Privacy Act became
effective in 2020 and its successor, the California Privacy Rights Act, which will be effective January 1, 2023),
Europe (where the General Data Protection Regulation became effective in 2018), Brazil (where the Lei Geral de
Proteção de Dados became effective in 2020), China (where the Personal Information Protection Law became
effective on November 1, 2021) 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, 2021 are
summarized below:
Segment
Corrugated Packaging
Consumer Packaging
Corporate and significant regional offices
Total
Number of Facilities
Leased
Owned
Total
113
79
192
67
42
11
120
180
121
11
312
The tables that follow show our annual production capacity in thousands of tons by mill at September 30, 2021,
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 91%. We own all of our mills. At September 30, 2021, we also own
approximately 135,000 acres of forestlands in Brazil.
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Corrugated Packaging Mills - annual production capacity in thousands of tons
Location of Mill
Longview, WA
Fernandina Beach, FL
West Point, VA
Stevenson, AL
Solvay, NY
Hodge, LA
Tres Barras, Brazil (1)
Florence, SC
Panama City, FL
Dublin, GA
North Charleston, SC
Seminole, FL
Hopewell, VA
Tacoma, WA
Roanoke Rapids, NC
La Tuque, QC
Cowpens, SC
St. Paul, MN
Morai, India
Total Capacity (2)
Linerboard Medium
265
460
950
White Top
Linerboard
Kraft
Paper/Bag
375
Saturating
Kraft /
Folding
Carton
Market
Pulp
Bleached
Paperboard
200
885
272
230
137
198
185
200
25
2,597
548
800
520
710
353
137
235
402
527
105
290
45
155
6,237
750
275
345
370
292
70
341
60
210
131
1,370
986
370
362
131
Total
Capacity
1,100
950
950
885
820
800
750
710
645
615
605
600
527
510
500
476
230
200
180
12,053
(1) Reflects the fiscal 2021 completion of the expansion project and annual capacity once the strategic project is fully ramped
up.
(2) Our fiber sourcing for our Corrugated Packaging mills is approximately 63% virgin and 37% 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)
Coated
Natural
Kraft
1,035
95
Bleached
Paperboard
950
385
360
1,695
1,130
Coated
Recycled
Paperboard
Specialty
Recycled
Paperboard Linerboard
Market
Pulp
170
160
127
111
80
648
140
118
64
32
354
180
110
180
110
Total
Capacity
1,035
950
660
470
170
160
140
127
118
111
80
64
32
4,117
(1) Reflects the expected annual capacity and product mix after deferring the October 2020 announced machine shutdown.
(2) Our fiber sourcing for our Consumer Packaging mills is approximately 75% virgin and 25% recycled.
32
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 17. Commitments and Contingencies of the Notes to Consolidated Financial Statements for
additional information.
Item 4.
MINE SAFETY DISCLOSURES
Not applicable.
33
PART II: FINANCIAL INFORMATION
Item 5.
MARKET FOR THE REGISTRANTS 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 5, 2021, there were approximately 6,145 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
Our short-term goal has been to reduce debt and leverage and return capital to stockholders through a
competitive annual dividend. Our longer-term capital allocation priorities include (i) investing in our business, (ii)
consistently growing our dividend, (iii) maintaining our investment grade profile, (iv) pursuing tuck-in acquisitions
that align to our strategy and generate attractive returns, and (v) opportunistic share repurchases.
In October 2021, our board of directors declared a quarterly dividend of $0.25 per share, representing a $1.00
per share annualized dividend or an increase of 25% since our February 2021 dividend. The recent decisions to
increase our dividend reflect the confidence we have in our business and our ability to generate strong cash flows,
as well as the progress we have made in reducing debt since we began implementing the WestRock Pandemic
Action Plan in May 2020. In fiscal 2021, we paid an annual dividend of $0.88 per share compared to $1.33 per
share in fiscal 2020 and $1.82 per share in fiscal 2019. See Item 7. “Managements Discussion and Analysis of
Financial Condition and Results of Operations Liquidity and Capital Resources Cash Flow Activity”,
for additional information.
Securities Authorized for Issuance Under Equity Compensation Plans
See Part III, Item 12 of this Form 10-K and Note 19. Stockholders Equity of the Notes to Consolidated
Financial Statements for additional information.
Stock Repurchase Plan
The following table presents information with respect to purchases of our Common Stock that we made during
the three months ended September 30, 2021:
Period
Total
Number of
Shares
Purchased
Average
Price
Paid Per
Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
Maximum
Number of
Shares that May
Yet Be
Purchased
Under the Plans
or Programs
July 1, 2021 July 31, 2021
August 1, 2021 August 31, 2021
September 1, 2021 September 30, 2021
Total
$
1,977,928
509,061
2,486,989
50.65
48.89
1,977,928
509,061
2,486,989
19,128,697
17,150,769
16,641,708
(1)
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. See “Note 19. Stockholders
Equity of the Notes to Consolidated Financial Statements for additional information.
Item 6.
[RESERVED]
34
Item 7.
MANAGEMENTS 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, sustainable 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 two 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; and Consumer Packaging, which consists of our
consumer mills, food and beverage and partition operations. Prior to the completion of our monetization program in
fiscal 2020, we had a third reportable segment, Land and Development, which previously sold real estate, primarily
in the Charleston, SC region. Following completion of the monetization of these assets, we ceased reporting the
results of the Land and Development segment as a separate segment. We have not included a discussion of the
Land and Development segment below as its net sales and segment income are not significant. See “Note 7.
Segment Information” of the Notes to Consolidated Financial Statements for certain disclosures with respect to
our former Land and Development segment.
In the first quarter of fiscal 2022, we expect to realign our segments and will disclose three reportable
segments: Packaging, which will consist of our converting operations and associated integrated profit from our mill
system; Paper, which will consist of third-party paper sales and associated profit from our mill system; and
Distribution, which will consist of our distribution business combined with our merchandising display assembly
operations.
A detailed discussion of the fiscal 2021 year-over-year changes can be found below and a detailed discussion
of fiscal 2020 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,
2020.
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 was 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 owned 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.
35
EXECUTIVE SUMMARY
In fiscal 2021, we continued to pursue our strategy of offering differentiated, sustainable paper and packaging
solutions that help our customers win. As a result of our broad portfolio, 188 customers bought at least $1 million
from each of our Corrugated Packaging and Consumer Packaging segments in fiscal 2021. Net sales of $18,746.1
million for fiscal 2021 increased $1,167.3 million, or 6.6%, compared to fiscal 2020 primarily due to higher selling
price/mix and higher volumes. In the second quarter of fiscal 2021, we experienced lost sales associated with the
Ransomware Incident and winter weather events (the “Events”) and we estimate these Events decreased net
sales by approximately $189.1 million. Additionally, we experienced aggregate favorable impact of
foreign
currency across our segments. Volumes in fiscal 2020 were negatively impacted by COVID-19, primarily in the last
half of the fiscal year.
Segment income increased $211.3 million in fiscal 2021 compared to fiscal 2020, primarily due to higher
Consumer Packaging and Corrugated Packaging segment income. A detailed review of our performance appears
below under “Results of Operations”.
We generated $2,279.9 million of net cash provided by operating activities in fiscal 2021, compared to
$2,070.7 million in fiscal 2020. The increase was primarily due to a $141.0 million net decrease in the use of
working capital compared to the prior year period, including the payment of certain fiscal 2020 bonuses and the
Company’s 401(k) match and annual company contribution (i.e. up to 5% and 2.5%, respectively) in the form of
stock, rather than cash, and deferral of certain payroll taxes in connection with the WestRock Pandemic Action
Plan. See “COVID-19 RESPONSE WestRock Pandemic Action Plan” for more information. We invested
$815.5 million in capital expenditures in fiscal 2021 while returning $233.8 million in dividends to our stockholders
and repurchasing $122.4 million of Common Stock. 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.
Earnings per diluted share was $3.13 in fiscal 2021 compared to loss per diluted share of $2.67 in fiscal 2020.
Adjusted Earnings Per Diluted Share were $3.39 and $2.75 in fiscal 2021 and 2020, 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 2021 and 2020 performance appears below under “Results of Operations”.
Ransomware Incident
As previously disclosed, on January 23, 2021, we detected a ransomware incident impacting certain of our
systems. Promptly upon our detection of this incident, we initiated response and containment protocols and our
security teams, supplemented by leading cyber defense firms, worked to remediate this incident. These actions
included taking preventative measures, including shutting down certain systems out of an abundance of caution,
as well as taking steps to supplement existing security monitoring, scanning and protective measures. We notified
law enforcement and contacted our customers to apprise them of the situation.
We undertook extensive efforts to identify, contain and recover from this incident quickly and securely. Our
teams worked to maintain our business operations and minimize the impact on our customers and teammates. In
our second quarter Form 10-Q, we announced that all systems were back in service. All of our mills and converting
locations began producing and shipping paper and packaging at pre-ransomware levels in March 2021 or earlier.
Our mill system production was approximately 115,000 tons lower than planned for the quarter ended March 31,
2021 as a result of this incident. While shipments from some of our facilities initially lagged behind production
levels, this gap closed as systems were restored during the second quarter of fiscal 2021. In locations where
technology issues were identified, we used alternative methods, in many cases manual methods, to process and
ship orders. We systematically brought our information systems back online in a controlled, phased approach.
We estimate the pre-tax income impact of the lost sales and operational disruption of this incident on our
operations in the second quarter of fiscal 2021 was approximately $50 million, as well as approximately $20 million
of ransomware recovery costs, primarily professional fees. In addition, we incurred approximately $9 million of
ransomware recovery costs in the third quarter of fiscal 2021. In the fourth quarter of fiscal 2021, we recorded a
$15 million credit for preliminary recoveries – approximately $10 million as a reduction of selling, general, and
administrative expenses (“SG&A”) excluding intangible amortization and approximately $5 million as a reduction of
36
cost of goods sold. We expect to recover substantially all of the remaining ransomware losses from cyber and
business interruption insurance in future periods. Disputes over the extent of insurance coverage for claims are not
uncommon, and there will be a time lag between the incurrence of costs and the receipt of any insurance
proceeds.
In response to the ransomware event, we accelerated information technology investments that we had
previously planned to make in future periods in order to further strengthen our information security and technology
infrastructure. We engaged a leading cybersecurity defense firm that completed a forensics investigation of the
ransomware incident and we are taking appropriate actions in response to the findings. For example, in the short-
term, we reset all credentials Company-wide and strengthened security tooling across our servers and
workstations. Longer term, in collaboration with our strategic partners, we established a roadmap to advance the
maturity and effectiveness of our information security and resiliency capabilities. This roadmap includes initiatives
to further strengthen our information security posture across the Company, and to enable us to potentially detect,
respond to and recover from security and technical
incidents in a faster and more effective manner. More
specifically, we are progressing projects to bolster our security monitoring capabilities, strengthen our access
controls, reduce risks associated with third-parties, and to enhance the information security of our mills and plants.
See Item 1A. Risk Factors We are Subject to Cyber-Security Risks, Including Related to Customer,
Employee, Vendor or Other Company Data.
Expectations for the First Quarter of Fiscal 2022 and Fiscal 2022
In the first quarter of fiscal 2022, we expect a sequential decline in net sales and earnings from the fourth
quarter of fiscal 2021 reflecting the normal season sequential volume declines in many of our businesses and
scheduled mill maintenance outages. We expect lower volume with three fewer shipping days during the first
quarter of fiscal 2022, although in line with shipping days in the first quarter of fiscal 2021. Due to delays in mill
maintenance in fiscal 2021 for items such as COVID-19 and the Ransomware Incident, we expect approximately
200,000 tons of maintenance downtime,
the peak maintenance outage period for fiscal 2022. We expect
sequential cost inflation driven primarily by higher natural gas, transportation, and recycled and virgin fiber costs
along with increased health insurance costs prior to the annual reset of employee deductibles. However, we
expect the flow through of the previously published price increases we are implementing to more than offset
inflation.
In fiscal 2022, we expect solid demand across most of our end markets and continued flow through of the
previously published price increases. We expect record sales and operating profit despite continued commodity
input cost inflation and productivity unavoidably affected by supply chain challenges and higher labor costs that
may persist through the fiscal year. We expect the implementation of previously published price increases will
outpace inflation despite our expectation for higher recycled fiber, energy, virgin fiber, chemical and transportation
costs. In addition, we expect to benefit from the fiscal 2021 completion of strategic investments such as the new
paper machine at our Florence, SC mill and our Tres Barras mill upgrade. We expect our planned mill
maintenance outage schedule will be approximately 100,000 tons higher than in fiscal 2021.
With the completion of certain of our strategic projects in fiscal 2021, including the paper machine at our
Florence, SC mill and the Tres Barras mill upgrade project, we expect capital expenditures of approximately $1.0
billion in fiscal 2022.
WestRock Pandemic Action Plan
COVID-19 RESPONSE
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 are continuing to focus on the protection,
safety and well-being of our teammates and continuing to match our supply with our customers’ demand. We have
modified the WestRock Pandemic Action Plan as the impact of COVID-19 has evolved. For example, we changed
our capital expenditure assumptions, increased our May 2021 dividend, and in October 2021, announced an
37
incremental increase to our November 2021 dividend, in each case as described below. We expect that the actions
to the plan will provide an additional
that we have undertaken and will continue to undertake pursuant
approximately $1 billion in cash through the end of calendar 2021 that we will be able to use to reduce our
outstanding indebtedness. In fiscal 2020, we achieved more than $350 million of the approximately $1 billion goal
set forth in the WestRock Pandemic Action Plan, as modified. As of September 30, 2021, we had achieved more
than $975 million of the approximately $1 billion goal. The ultimate level achieved has been impacted by
modifications such as increased capital
investments and increased dividends as we modified the WestRock
Pandemic Action Plan.
Pursuant to the WestRock Pandemic Action Plan, we took a series of actions that were designed to protect the
safety and well-being of our teammates and preserve cash that could be used to pay down our outstanding debt,
all while continuing to match our supply with our customers’ demand. For example, we committed to (i) reducing
discretionary expenses, (ii) using Common Stock to make Company funded 401(k) match and annual contribution
(i.e. up to 5% and 2.5%, respectively) from July 1, 2020 through September 30, 2021 (final period funded in
October 2021), (iii) targeting a reduction of fiscal 2021 capital investments to a range of $800 million to $900
million, up from an initial range of $600 to $800 million (we invested $815.5 million in fiscal 2021), and (iv) resetting
our quarterly dividend to $0.20 per share for an annual rate of $0.80 per share, which we did in May 2020. We paid
quarterly dividends of $0.24 per share in May 2021 and August 2021 and in October 2021, our board of directors
declared a quarterly dividend of $0.25 per share, representing a $1.00 per share annualized dividend or an
increase of 25% since our February 2021 dividend. The recent decisions to increase our dividend reflects the
confidence we have in our business and our ability to generate strong cash flows, as well as the progress we have
made in reducing debt since we began implementing the WestRock Pandemic Action Plan.
In addition to the items addressed above, we (i) decreased the salaries of our senior executive team by up to
25% from May 1, 2020 through December 31, 2020 and decreased the retainer for members of our board of
directors by 25% for the third and fourth calendar quarters of 2020, (ii) used Common Stock to pay our annual
incentive for fiscal 2020 for nearly all participants and set the payout level at 50% of the target opportunity subject
to a safety modifier, as well as for Company funded 401(k) match and our annual contribution as noted above, and
(iii) postponed $116.5 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. We also reduced fiscal
investments to $978.1 million after targeting to reduce them by approximately $150 million to
2020 capital
approximately $950 million. We expect to pay the employment taxes deferred under the CARES Act as required,
50% by December 2021 and the remaining 50% by December 2022.
During fiscal 2021, we recorded $38.4 million of expense related to COVID-19, including $22.0 million of relief
payments to employees in the first quarter of fiscal 2021. The balance was for increased costs for safety, cleaning
and other items related to COVID-19. 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 began tracking the impact of costs related to COVID-19
in the third quarter of fiscal 2020. We expect to continue to incur expenses for these items as needed in the future.
38
RESULTS OF OPERATIONS
The following table summarizes our consolidated results for the two years ended September 30, 2021:
(In millions)
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
Restructuring and other costs
Goodwill impairment
Operating profit (loss)
Interest expense, net
Loss on extinguishment of debt
Pension and other postretirement non-service income
Other income, net
Equity in income of unconsolidated entities
Income (loss) before income taxes
Income tax expense
Consolidated net income (loss)
Less: Net income attributable to noncontrolling interests
Net income (loss) attributable to common stockholders
Year Ended September 30,
2021
2020
$
$
18,746.1
15,315.8
3,430.3
17,578.8
14,381.6
3,197.2
1,759.3
357.1
4.1
(2.9)
31.5
1,281.2
(372.3)
(9.7)
134.9
10.9
40.9
1,085.9
(243.4)
842.5
(4.2)
838.3
$
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)
$
Net Sales (Unaffiliated Customers)
Net sales in fiscal 2021 increased $1,167.3 million, or 6.6%, compared to fiscal 2020 primarily due to higher
selling price/mix and higher volumes. In the second quarter of fiscal 2021, we experienced lost sales associated
with the Events that we estimate decreased net sales by approximately $189.1 million. Additionally, we
experienced aggregate favorable impact of foreign currency across our segments. Volumes in fiscal 2020 were
negatively impacted by COVID-19, primarily in the last half of the fiscal year. 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 increased to $15,315.8 million in fiscal 2021 compared to $14,381.6 million in fiscal 2020.
Cost of goods sold as a percentage of net sales was 81.7% in fiscal 2021 compared to 81.8% in fiscal 2020. The
increase in cost of goods sold in fiscal 2021 compared to fiscal 2020 was primarily due to higher volumes,
increased cost inflation and other items, including operational disruption associated with the Events. These items
were partially offset by productivity improvements and other items. In fiscal 2020, we incurred approximately $4.5
million of direct costs and property damage associated with Hurricane Michael, and received Hurricane Michael-
related insurance proceeds of $32.3 million and recorded a reduction of cost of goods sold of $32.1 million in
connection with an indirect tax claim in Brazil, primarily in the Corrugated Packaging segment. The Hurricane
Michael-related insurance proceeds were for $20.6 million of direct costs and property damage and for $11.7
million for business interruption recoveries. In fiscal 2021, we recorded costs of goods sold of $35.4 million related
to COVID-19 primarily for relief payments to employees and increased costs for safety, cleaning and other items
related to COVID-19. We began to track and report the impact of COVID-19 on fiscal 2020 in the third fiscal
quarter. Fiscal 2020 includes costs of goods sold of $56.5 million associated with COVID-19, including one-time
recognition awards to our teammates who work in manufacturing and operations recorded in the third quarter of
fiscal 2020, increased costs for safety, cleaning and other items related to COVID-19. We expect to continue to
39
incur additional costs related to safety, cleaning and other items related to COVID-19 as needed in the foreseeable
future. 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
SG&A excluding intangible amortization increased $134.9 million to $1,759.3 million in fiscal 2021 compared to
fiscal 2020 primarily due to a $119.8 million increase in bonus and stock-based compensation expense as a result
of expected fiscal 2021 payments being higher than fiscal 2020 payments, including a $9.6 million acceleration of
stock-based compensation in connection with the departure of our former Chief Executive Officer in the second
quarter of fiscal 2021. In addition, we incurred increased aggregate costs for consulting, professional and legal
fees of $21.2 million compared to the prior year period, primarily associated with the Ransomware Incident. These
increases were partially offset by a $29.4 million decrease in bad debt expense compared to the prior year period,
as well as a $18.4 million reduction in travel and entertainment associated with prolonged shelter-in-place orders in
response to the ongoing effects of COVID-19. SG&A excluding intangible amortization as a percentage of net
sales increased in fiscal 2021 to 9.4% from 9.2% in fiscal 2020.
Selling, General and Administrative Intangible Amortization
SG&A intangible amortization was $357.1 million and $400.5 million in fiscal 2021 and 2020, respectively. The
decline was primarily attributable to certain intangibles from prior acquisitions reaching full amortization.
Restructuring and Other Costs
We recorded aggregate pre-tax restructuring and other costs of $31.5 million and $112.7 million for fiscal 2021
and 2020, 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.
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 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. In fiscal
2021, no impairments were recorded as all reporting units that have goodwill have a fair value that exceeded their
carrying values by more than 20% each.
Interest Expense, net
Interest expense, net was $372.3 million and $393.5 million for fiscal 2021 and 2020, respectively. The
decrease was primarily due to lower debt levels in the current fiscal year that was partially offset by higher interest
rates in the current fiscal year. Additionally, fiscal 2020 was impacted by $20.5 million of interest income recorded
in connection with an indirect tax claim in Brazil partially offset by a $15.0 million increase in interest expense
associated with the remeasurement of our multiemployer pension liabilities. See “Note 17. Commitments and
the Notes to Consolidated Financial Statements for additional
Contingencies Indirect Tax Claim” of
information. See Item 1A. Risk Factors We Have Had Significant Levels of Indebtedness in the Past and
May Incur Significant Levels of Indebtedness in the Future, Which 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 $134.9 million and $103.3 million in fiscal 2021 and
2020, respectively. The increase was primarily due to the increase in plan asset balances used to determine the
40
expected return on plan assets for fiscal 2021. 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 $10.9 million and $9.5 million in fiscal 2021 and 2020, respectively. Fiscal 2021
primarily included a $16.5 million gain on sale of the Summerville, SC sawmill and a $16.0 million gain on sale of a
legacy cost method investment, which were partially offset by a $22.5 million charge associated with not exercising
an option to purchase an additional equity interest in Grupo Gondi.
Equity in Income of Unconsolidated Entities
We recorded equity in income of unconsolidated entities of $40.9 million in fiscal 2021 compared to $15.8
million in fiscal 2020. The increase was driven by earnings improvement across the portfolio, most notably, our
joint venture with Grupo Gondi.
Provision for Income Taxes
We recorded income tax expense of $243.4 million for fiscal 2021 at an effective tax rate of 22.4%, compared
to an income tax expense of $163.5 million at an effective tax rate of (31.3)% in fiscal 2020, due to the loss before
income tax in fiscal 2020. 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. Excluding
the effect of the goodwill impairment, which was largely not tax deductible, our effective tax rate was 22.5% in fiscal
2020.
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 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 (we received $180.0 million in
fiscal 2019 that consisted of $55.3 million of business interruption recoveries and $124.7 million for direct costs and
property damage). 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.
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
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. 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.
41
North American Corrugated Packaging Shipments
Fiscal 2020
North American Corrugated Packaging
Shipments - thousands of tons
North American Corrugated Containers
Shipments - BSF
North American Corrugated Containers Per
Shipping Day - MMSF
Fiscal 2021
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
2,591.2
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
2,519.3
2,485.2
2,582.7
2,688.7
10,275.9
25.4
24.7
25.3
24.6
100.0
416.7
391.5
402.0
383.6
398.2
Fiscal 2020
Brazil / India Corrugated Packaging Shipments
- thousands of tons
168.1
182.5
176.4
185.1
712.1
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 2021
Brazil / India Corrugated Packaging Shipments
1.7
22.9
1.6
21.3
1.6
21.0
1.9
24.3
6.8
22.4
- thousands of tons
156.8
183.9
194.9
201.1
736.7
Brazil / India Corrugated Containers Shipments
- BSF
Brazil / India Corrugated Containers Per
Shipping Day - MMSF
1.8
23.5
1.9
24.5
1.9
26.0
2.1
26.4
7.7
25.1
42
Corrugated Packaging Segment Net Sales and Income
(In millions, except percentages)
Net Sales (1)
Segment
Income
Return
on Sales
Fiscal 2020
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Fiscal 2021
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
$
$
$
$
2,909.5
2,882.5
2,728.8
2,898.4
11,419.2
2,864.5
2,913.4
3,167.1
3,398.7
12,343.7
$
$
$
$
283.4
244.5
227.9
281.9
1,037.7
215.0
205.3
321.7
374.8
1,116.8
9.7%
8.5
8.4
9.7
9.1%
7.5%
7.0
10.2
11.0
9.0%
(1) Net Sales before intersegment eliminations
Net Sales (Aggregate) Corrugated Packaging Segment
Net sales before intersegment eliminations for the Corrugated Packaging segment increased $924.5 million in
fiscal 2021 compared to fiscal 2020 primarily reflecting $675.7 million of higher selling price/mix and $298.0 million
of higher volumes that was partially offset by $25.2 million of unfavorable impact of foreign currency. Volumes were
negatively impacted by an estimated $77.0 million and $39.9 million due to the Ransomware Incident and winter
weather, respectively, in the second quarter of fiscal 2021. Volumes in fiscal 2020 were negatively impacted by
COVID-19, primarily in the last half of the fiscal year. Record North American per day box shipments during the
fiscal year ended September 30, 2021 increased 5.2% compared to the prior fiscal year.
Segment Income Corrugated Packaging Segment
Segment income attributable to the Corrugated Packaging segment in fiscal 2021 increased $79.1 million
compared to fiscal 2020, primarily due to $686.5 million of margin impact from higher selling price/mix, $93.7
million of higher volumes excluding the Events, $24.8 million of lower depreciation and amortization, primarily due
to accelerated depreciation incurred in the prior year period associated with the Florence, SC paper machine
project and the North Charleston, SC reconfiguration project, an estimated $19.9 million of lower economic
downtime and other items, including higher segment income related to our North Charleston, SC mill and the
Florence, SC mill following last year’s reconfiguration and paper machine projects. The impact of COVID-19
recognition awards to our manufacturing and operations teammates and increased costs for safety, cleaning and
other items related to COVID-19 for fiscal 2020 was $33.5 million compared to $20.8 million in fiscal 2021. These
items were partially offset by an estimated $553.3 million of net cost inflation, an estimated $69.6 million of lower
productivity, $42.6 million of estimated impact from the Ransomware Incident, $27.8 million of Hurricane Michael
insurance recoveries net of direct costs and $29.1 million of decreased indirect tax claims in Brazil both in the prior
year period, $15.9 million of estimated impact from winter weather in the second quarter of fiscal 2021 and other
items. Net cost inflation consisted primarily of higher recovered fiber, wage and other, energy, freight, chemical
and virgin fiber costs compared to the prior fiscal year.
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.
43
Fiscal 2020
Consumer Packaging Shipments - thousands
of tons
Fiscal 2021
Consumer Packaging Shipments - thousands
of tons
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Fiscal
Year
922.4
987.7
984.5
976.8
3,871.4
940.4
913.0
987.4
998.4
3,839.2
Consumer Packaging Segment Net Sales and Income
(In millions, except percentages)
Net Sales (1)
Segment
Income
Return
on Sales
Fiscal 2020
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
Fiscal 2021
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
$
$
$
$
1,536.9
1,616.3
1,552.6
1,627.2
6,333.0
1,595.1
1,589.9
1,734.7
1,783.0
6,702.7
$
$
$
$
46.2
90.8
95.3
91.4
323.7
92.5
81.2
132.0
151.6
457.3
3.0%
5.6
6.1
5.6
5.1%
5.8%
5.1
7.6
8.5
6.8%
(1) Net Sales before intersegment eliminations
Net Sales (Aggregate) Consumer Packaging Segment
Net sales before intersegment eliminations for the Consumer Packaging segment increased $369.7 million in
fiscal 2021 compared to the prior year primarily due to $202.6 million of higher selling price/mix, $78.3 million of
higher volumes and $88.5 million of favorable impact of foreign currency. Volumes were negatively impacted by an
estimated $40.5 million and $31.7 million due to the Ransomware Incident and winter weather, respectively, in the
second quarter of fiscal 2021. Additionally, volumes in fiscal 2020 were negatively impacted by COVID-19,
primarily in the last half of the fiscal year.
Segment Income Consumer Packaging Segment
Segment income attributable to the Consumer Packaging segment in fiscal 2021 increased $133.6 million
compared to the prior year. Segment income in the period increased primarily due to $168.3 million of margin
impact from higher selling price/mix, an estimated $158.4 million of productivity improvements, $35.6 million of
higher volumes excluding the Events, an estimated $31.0 million of lower economic downtime, and other items.
The impact of COVID-19 recognition awards to our manufacturing and operations teammates and increased costs
for safety, cleaning and other items related to COVID-19 for fiscal 2020 was $25.1 million compared to $15.8
million in fiscal 2021. These items were partially offset by an estimated $225.4 million of net cost inflation, an
estimated $14.1 million impact of winter weather, an estimated $13.3 million impact of the Ransomware Incident,
and other items. Net cost inflation consisted primarily of higher wage and other, recovered fiber, chemical, energy
and freight costs.
44
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 accounts receivable sales agreements, 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 more
information regarding our debt. 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.
We are a party to enforceable and legally binding contractual obligations involving commitments to make
payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource
needs. Certain contractual obligations are reflected on the consolidated balance sheet as of September 30, 2021,
while others are considered future obligations. Our contractual obligations primarily consist of items such as: long-
term debt, including current portion, lease obligations, purchase obligations and other obligations. See Item 7.
“Managements Discussion and Analysis of Financial Condition and Results of Operations Contractual
Obligations, for additional information.
Cash and cash equivalents were $290.9 million at September 30, 2021 and $251.1 million at September 30,
2020. Approximately three-fourths of the cash and cash equivalents at September 30, 2021 were held outside of
the U.S. The proportion of cash and cash equivalents held outside of the U.S. generally varies from period to
total debt was $8,194.1 million, $168.8 million of which was current. At
period. At September 30, 2021,
September 30, 2020, total debt was $9,430.6 million, $222.9 million of which was current. Included in our total debt
at September 30, 2021 was $192.4 million of non-cash acquisition related step-up. Total debt was primarily
impacted by net cash provided by operating activities exceeding aggregate capital expenditures, dividends and
stock repurchases.
At September 30, 2021, we had approximately $3.7 billion of availability under our 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. On September 10, 2021, we redeemed $400 million aggregate principal amount
of our 4.900% senior notes due March 2022 using cash and cash equivalents and recorded a loss on
extinguishment of debt of $8.6 million.
Certain restrictive covenants govern our maximum availability under our credit facilities. We test and report our
compliance with all of these covenants as required by these facilities and were in compliance with all of these
covenants at September 30, 2021.
At September 30, 2021, we had $63.2 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, monetization facilities where we sell short-term receivables to
third-party financial institutions and a receivables securitization facility. We describe these programs below and in
the Notes to Consolidated Financial Statements.
these customer-based supply chain finance programs generally meet
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
the
requirements to be accounted for as sales in accordance with guidance under Financial Accounting Standards
Board’s (“FASB”) Accounting Standards Codification (“ASC”) 860, “Transfers and Servicing” (“ASC 860”) resulting
in derecognition of such receivables from our consolidated balance sheets. Receivables involved with these
customer-based supply chain financing programs constitute approximately 2% of our annual net sales. In addition,
we have monetization facilities that sell
the short-term receivables
generated from certain customer trade accounts. For a discussion of our monetization facilities see “Note 12. Fair
Value A/R Sales Agreements”.
to third-party financial
institutions all of
45
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 sheets 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 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 financing activities
Year Ended September 30,
2021
2020
$
$
$
2,279.9
$
(676.0) $
(1,580.4) $
2,070.7
(921.5)
(1,021.1)
Net cash provided by operating activities during fiscal 2021 increased $209.2 million from fiscal 2020 primarily
due to higher consolidated net income and a $141.0 million net decrease in the use of working capital compared to
the prior year.
Net cash used for investing activities of $676.0 million in fiscal 2021 consisted primarily of $815.5 million for
capital expenditures that were partially offset by $58.5 million of proceeds from the sale of the Summerville, SC
sawmill, $44.9 million of proceeds from corporate owned life insurance and $29.5 million of proceeds from the sale
of investments. Net cash used for investing activities of $921.5 million in fiscal 2020 consisted primarily of $978.1
million for capital expenditures that were 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.
We invested $815.5 million in capital expenditures in fiscal 2021, which is in the range of the $800 million to
$900 million we expected to invest heading into the year. With the completion of certain of our strategic projects in
fiscal 2021, including the paper machine at our Florence, SC mill and the Tres Barras mill upgrade project, we
expect capital expenditures of approximately $1.0 billion in fiscal 2022. At this level of capital investment, we are
confident that we will continue to invest in the appropriate safety, environmental and maintenance projects while
also making investments to support productivity and growth in our business. However, it is possible that our capital
46
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 2021, net cash used for financing activities of $1,580.4 million consisted primarily of a net decrease in
debt of $1,241.3 million and cash dividends paid to stockholders of $233.8 million and stock repurchases of $122.4
million. 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.
We estimate that we will
invest approximately $21 million for capital expenditures during fiscal 2022 in
connection with matters relating to environmental compliance. We were obligated to purchase approximately $249
million of fixed assets at September 30, 2021 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, 2021, the U.S. federal, state and foreign net operating losses and other U.S. federal and
state tax credits available to us aggregated approximately $59 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 and 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 fiscal
2022 cash tax rate will be slightly lower than our income tax rate. Our cash tax rate in fiscal 2023 and 2024 will be
driven slightly higher than our income tax rate primarily due to the absence of certain nonrecurring tax credits, the
expected release of a tax reserve and the reduction in capital investments, including the timing of depreciation on
our qualifying capital investments as allowed under the Tax Cuts and Jobs Act.
During fiscal 2021 and 2020, we made contributions of $23.2 million and $22.5 million, respectively, to our U.S.
and non-U.S. pension plans. Based on current facts and assumptions, we expect to contribute approximately $25
million to our U.S. and non-U.S. pension plans in fiscal 2022. 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 $23 million to $24 million annually in fiscal 2023 through 2026. 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, 2021 was
$405.1 million. 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 PIUMPF and
Central States, Southeast and Southwest Areas Pension Plan (“Central States”), and recorded estimated
withdrawal liabilities for each. We also have liabilities associated with other MEPPs that we, or legacy companies,
have withdrawn from in the past. Currently, we pay approximately $14 million a year in withdrawal
liabilities,
excluding accumulated funding deficiency demands. With respect to certain other MEPPs, in the event we
withdraw from one or more of the MEPPs in the future, it is reasonably possible that we may incur withdrawal
liabilities 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. At September 30, 2021 and
September 30, 2020, we had withdrawal
liabilities recorded of $247.1 million and $252.0 million, respectively,
including liabilities associated with PIUMPF’s 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.
In October 2021, our board of directors declared a quarterly dividend of $0.25 per share, representing a $1.00
per share annualized dividend or an increase of 25% since our February 2021 dividend. The recent decisions to
increase our dividend reflects the confidence we have in our business and our ability to generate strong cash
flows, as well as the progress we have made in reducing debt since we began implementing the WestRock
Pandemic Action Plan. In fiscal 2021, we paid an annual dividend of $0.88 per share (we paid a quarterly dividend
of $0.24, $0.24, $0.20 and $0.20 per share in August 2021, May 2021, February 2021 and November 2020,
47
respectively) compared to $1.33 per share in fiscal 2020 (we paid a quarterly dividend of $0.20, $0.20, $0.465 and
$0.465 per share in August 2020, May 2020, February 2020 and November 2019, respectively) and $1.82 per
share in fiscal 2019. In May 2020, we reduced our dividend given the uncertain market conditions at the time driven
by COVID-19. We believe the reduction was prudent given the uncertain market conditions at the time and the
reduction has allowed us to allocate additional cash to pay down our outstanding debt. Our short-term goal has
been to reduce debt and leverage and return capital to stockholders through a competitive annual dividend. Longer
term, our capital allocation priorities include (i) investing in our business, (ii) consistently growing our dividend, (iii)
maintaining our investment grade profile, (iv) pursue tuck-in acquisitions that align to our strategy and generate
attractive returns, and (v) opportunistic share repurchases.
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
2021, we repurchased approximately 2.5 million shares of our Common Stock for an aggregate cost of $125.1
million (a portion of which settled after September 30, 2021). 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, 2021, we had approximately 16.6 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 accounts receivable sales agreements,
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, 2021, and the
effect these obligations are expected to have on our liquidity and cash flow in future periods in the following table.
Certain amounts in this table are based on management’s estimates and assumptions about these obligations,
including their duration, the possibility of renewal, anticipated actions by third parties and other factors, including
estimated minimum pension plan contributions and estimated benefit payments related to postretirement
obligations, supplemental retirement plans and deferred compensation plans. Because these estimates and
assumptions are subjective, the enforceable and legally binding obligations we actually pay in future periods may
vary from those presented in the table.
(In millions)
Total
Payments Due by Period
Fiscal
2023
and 2024
Fiscal
2025
and 2026
Fiscal
2022
Thereafter
Long-Term Debt, including current portion,
excluding finance lease obligations (1)
Lease obligations (2)
Purchase obligations and other (3) (4) (5)
Total
$ 7,787.9 $
1,108.9
1,749.2
160.2 $ 1,258.2 $ 1,990.4 $ 4,379.1
406.6
207.0
377.0
1,021.5
$10,646.0 $ 1,388.7 $ 1,791.4 $ 2,303.2 $ 5,162.7
311.3
221.9
184.0
128.8
(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 $142.1 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.
48
(2) See “Note 14. 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 $80.2 million of MEPP
withdrawal liabilities recorded as of September 30, 2021, 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 defined pay-out schedule.
$250.4 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.
Guarantor Summarized Financial Information
WRKCo, Inc. (the “Issuer”), a wholly owned subsidiary of Parent (as defined below), has issued the following
debt securities pursuant to offerings registered under the Securities Act of 1933, as amended (collectively for
purposes of this subsection, the “Notes”):
Aggregate
Principal
Amount
(in millions)
Stated
Coupon
Rate
Maturity Date
Referred to as:
$
$
$
$
$
$
$
$
$
500
600
750
500
600
500
750
500
600
3.000% September 2024
3.750% March 2025
4.650% March 2026
3.375% September 2027
4.000% March 2028
3.900% June 2028
4.900% March 2029
4.200% June 2032
3.000% June 2033
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
the June 2033 Notes
Upon issuance, the Notes maturing in 2024, 2025, 2027 and March 2028 were fully and unconditionally
guaranteed by the Company, WRKCo Inc. and WestRock RKT, LLC (“RKT”) and WestRock MWV, LLC
(“MWV”, and together with RKT, 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 these Notes. The remaining
Notes were issued by the Issuer subsequent to the consummation of the KapStone Acquisition and were fully and
49
unconditionally guaranteed at the time of issuance by the Parent and the Guarantor Subsidiaries. Accordingly,
each series of the Notes is fully and unconditionally guaranteed on a joint and several basis by the Parent and the
Guarantor Subsidiaries (together, the “Guarantors”). Collectively, the Issuer and the Guarantors are the “Obligor
Group”.
Each series of Notes and the related guarantees constitute unsecured unsubordinated obligations of the
applicable obligor. Each series of Notes and the related guarantees ranks equally in right of payment with all of the
applicable obligor’s existing and future unsecured and unsubordinated debt; ranks senior in right of payment to all
of the applicable obligor’s existing and future subordinated debt; is effectively junior to the applicable obligor’s
existing and future secured debt to the extent of the value of the assets securing such debt; and is structurally
subordinated to all of the existing and future liabilities of each subsidiary of the applicable obligor (that is not itself
an obligor) that does not guarantee such Notes.
The indentures governing each series of Notes contain covenants that, among other things, limit our ability and
the ability of our subsidiaries to grant liens on our assets and enter into sale and leaseback transactions. In
addition, the indentures limit, as applicable, the ability of the Issuer and Guarantors to merge, consolidate or sell,
convey, transfer or lease our or their properties and assets substantially as an entirety. The covenants contained in
the indentures do not restrict the Company’s ability to pay dividends or distributions to stockholders.
The guarantee obligations of the Guarantors under the Notes are also subject to certain limitations and terms
similar to those applicable to other guarantees of similar instruments, including that (i) the guarantees are subject
to fraudulent transfer and conveyance laws and (ii) the obligations of each Guarantor under its guarantee of each
series of Notes will be limited to the maximum amount as will result in the obligations of such Guarantor under its
guarantee of such Notes not to be deemed to constitute a fraudulent conveyance or fraudulent transfer under
federal or state law.
Under each indenture governing one or more series of the Notes, a Guarantor Subsidiary will be automatically
and unconditionally released from its guarantee upon consummation of any transaction permitted under the
applicable indenture resulting in such Guarantor Subsidiary ceasing to be an obligor (either as issuer or guarantor).
Under the indentures, the guarantee of the Parent will be automatically released and will terminate upon the
merger of the Parent with or into the Issuer or another guarantor, the consolidation of the Parent with the Issuer or
another guarantor or the transfer of all or substantially all of the assets of the Parent to the Issuer or a guarantor. In
addition, if the Issuer exercises its defeasance or covenant defeasance option with respect to the Notes of a series
in accordance with the terms of the applicable indenture, each guarantor will be automatically and unconditionally
released from its guarantee of the Notes of such series and all its obligations under the applicable indenture.
The Issuer and each Guarantor is a holding company that conducts substantially all of its business through
subsidiaries. Accordingly, repayment of the Issuer’s indebtedness, including the Notes, is dependent on the
generation of cash flow by the Issuer’s and each Guarantor’s subsidiaries, as applicable, and their ability to make
such cash available to the Issuer and the Guarantors, as applicable, by dividend, debt repayment or otherwise.
The Issuer’s and the Guarantors’ subsidiaries may not be able to, or be permitted to, make distributions to enable
them to make payments in respect of their obligations, including with respect to the Notes in the case of the Issuer
and the guarantees in the case of the Guarantors. Each of the Issuer’s and the Guarantors’ subsidiaries is a
distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit the Issuer’s and
the Guarantors’ ability to obtain cash from their subsidiaries. In the event that the Issuer and the Guarantors do not
receive distributions from their subsidiaries, the Issuer and the Guarantors may be unable to make required
principal and interest payments on their obligations, including with respect to the Notes and the guarantees.
Pursuant to amended Rule 3-10 of Regulation S-X, the summarized financial information below is presented
for the Obligor Group on a combined basis after the elimination of intercompany balances and transactions among
the Obligor Group and equity in earnings from and investments in the non-Guarantor Subsidiaries. The
summarized financial information below should be read in conjunction with the Company’s consolidated financial
statements contained herein, as the summarized financial information may not necessarily be indicative of results
of operations or financial position had the subsidiaries operated as independent entities.
50
SUMMARIZED STATEMENT OF OPERATIONS
(In millions)
Net sales to unrelated parties
Net sales to non-Guarantor Subsidiaries
Gross profit
Interest expense, net with non-Guarantor Subsidiaries
Net loss and net loss attributable to the Obligor Group
SUMMARIZED BALANCE SHEETS
Year Ended
September 30,
2021
$
$
$
$
$
1,550.4
1,049.5
631.5
(66.8)
(94.8)
(In millions)
ASSETS
Total current assets
Noncurrent amounts due from non-
Guarantor Subsidiaries
Other noncurrent assets (1)
Total noncurrent assets
LIABILITIES
Current amounts due to non-
Guarantor Subsidiaries
Other current liabilities
Total current liabilities
Noncurrent amounts due to non-
Guarantor Subsidiaries
Other noncurrent liabilities
Total noncurrent liabilities
September 30,
2021
2020
$
$
$
$
$
$
$
310.4
306.1
1,980.5
2,286.6
2,281.4
130.4
2,411.8
3,437.4
7,296.6
10,734.0
$
$
$
$
$
$
$
334.8
310.0
2,096.7
2,406.7
1,520.1
237.9
1,758.0
2,821.3
8,633.4
11,454.7
(1) Other noncurrent assets includes aggregate goodwill and intangibles, net of $1,699.2 million and
$1,797.2 million as of September 30, 2021 and September 30, 2020, respectively.
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 our board of directors,
investors, potential investors, securities analysts and others with additional meaningful financial information that
should be considered when assessing our ongoing performance. Management also uses these non-GAAP
financial measures in making financial, operating and planning decisions, and in evaluating 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”.
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
51
Earnings Per Diluted Share are Net income (loss) attributable to common stockholders and Earnings (loss) per
diluted share, respectively.
Set forth below is a reconciliation of the non-GAAP financial measure Adjusted Earnings Per Diluted Share to
Earnings (loss) per diluted share, the most directly comparable GAAP measure (in dollars per share) for the
periods indicated.
Earnings (loss) per diluted share
Goodwill impairment
Restructuring and other items
COVID-19 employee payments
Grupo Gondi option
Ransomware recovery costs, net of insurance proceeds
Accelerated compensation ‒ former CEO
Loss on extinguishment of debt
Losses at closed plants, transition and start-up costs
North Charleston and Florence transition and
reconfiguration costs
Accelerated depreciation on major capital projects and
certain plant closures
MEPP liability adjustment due to interest rates
Gain on sale of investment
Gain on sale of sawmill
Brazil indirect tax claim
Litigation recovery
Adjustment related to Tax Cuts and Jobs Act
Direct recoveries from Hurricane Michael, net of
related costs
Gain on sale of certain closed facilities
Other
Adjustment to reflect adjusted earnings on a fully diluted basis
Adjusted Earnings Per Diluted Share
Years Ended September 30,
2021
2020
$
$
3.13
0.09
0.06
0.06
0.05
0.04
0.03
0.01
(0.05)
(0.03)
3.39
$
$
(2.67)
5.07
0.33
0.09
0.07
0.13
0.05
0.05
(0.14)
(0.07)
(0.06)
(0.05)
(0.05)
0.02
(0.02)
2.75
52
The GAAP results in the tables below for Pre-Tax, Tax and Net of Tax are equivalent to the line items “Income
(loss) before income taxes”, “Income tax expense” and “Consolidated net income (loss)”, respectively, as reported
on the Consolidated Statements of Operations. Set forth below are reconciliations of Adjusted Net Income to the
most directly comparable GAAP measure, Net income (loss) attributable to common stockholders (represented in
the table below as the GAAP Results for Consolidated net income (loss) (i.e., Net of Tax) less net income
attributable to Noncontrolling interests), for the periods indicated (in millions):
Year ended September 30,
2021
Year ended September 30,
2020
As reported
Goodwill impairment
Restructuring and other items
COVID-19 employee payments
Grupo Gondi option
Ransomware recovery costs, net of insurance
proceeds
Accelerated compensation ‒ former CEO
Loss on extinguishment of debt
Losses at closed plants, transition and
start-up costs
Accelerated depreciation on major capital
projects and certain plant closures
North Charleston and Florence transition and
reconfiguration costs
Multiemployer pension withdrawal expense
Gain on sale of investment
Gain on sale of sawmill
Gain on sale of certain closed facilities
Brazil indirect tax claim
MEPP liability adjustment due to interest rates
Litigation recovery
Adjustment related to Tax Cuts and Jobs Act
Direct recoveries from Hurricane Michael, net
of related costs
Land and Development operating results
Other
Adjusted Results
Noncontrolling interests
Adjusted Net Income
Net of
Tax
Net of
Tax
Tax
Pre-Tax
Pre-Tax
$1,085.9 $ (243.4) $ 842.5 $ (522.6) $ (163.5) $ (686.1)
1,314.3
84.5
23.9
1,333.2
112.7
31.6
(18.9)
(28.2)
(7.7)
(7.7)
(5.4)
(6.7)
31.5
22.0
22.5
23.8
16.6
15.8
Tax
18.9
11.7
9.7
3.0
0.7
(16.0)
(16.5)
(0.9)
(0.9)
(0.4)
(4.7)
(2.4)
(0.6)
(0.2)
2.4
8.3
0.2
0.3
0.1
14.2
11.7
7.3
2.4
0.5
(13.6)
(8.2)
(0.7)
(0.6)
(0.3)
1.5
21.9
17.3
43.4
0.9
(15.6)
(51.9)
15.0
(23.9)
(0.4)
1.1
(5.4)
16.5
(4.2)
13.1
(10.6)
(0.2)
3.8
16.0
(3.7)
5.9
(16.4)
32.8
0.7
(11.8)
(35.9)
11.3
(18.0)
(16.4)
(12.1)
(1.0)
4.5
$1,171.2 $ (259.8) $ 911.4 $ 952.1 $ (230.7) $ 721.4
(4.8)
$ 716.6
(16.1)
(1.3)
6.0
(4.2)
$ 907.2
4.0
0.3
(1.5)
We discuss certain of these charges in more detail in “Note 4. Restructuring and Other Costs”, “Note 7.
Segment Information” and “Note 17. 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
53
matters involves the making of estimates based on current
in
management’s judgment, could change in a manner that would materially affect management’s future estimates
with respect to such matters and, accordingly, could cause our future reported financial condition and results of
operations to differ materially from those that we are currently reporting based on management’s current
estimates.
facts, circumstances and assumptions that,
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 the 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.
During the fourth quarter of fiscal 2021, 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 12.0%. 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 by more than
20% 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 would have continued to
exceed its carrying value.
At September 30, 2021, the North American Corrugated, Consumer Packaging, Brazil Corrugated and Victory
Packaging reporting units had $3,518.5 million, $2,295.9 million, $103.7 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 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, 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.
Long-Lived Assets
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 right-of-use assets (“ROU”) and amortizing intangibles
54
other than goodwill,
is impaired. We review long-lived assets for impairment when events or changes in
circumstances indicate that the carrying amount of the long-lived asset might not be recoverable. If we determine
that indicators of impairment are present, we determine whether the estimated undiscounted cash flows for the
potentially impaired assets are less than the carrying value. This requires management to estimate future cash
flows through operations over the remaining useful life of the asset and its ultimate disposition. The assumptions
we use to estimate future cash flows are consistent with the assumptions we use for internal planning purposes,
updated to reflect current expectations. If our estimated undiscounted cash flows do not exceed the carrying value,
we estimate the fair value of the asset and record an impairment charge if the carrying value is greater than the fair
value of the asset. We estimate fair value using discounted cash flows, observable prices for similar assets, or
other valuation techniques.
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.
Accounting for Income Taxes
financial operations and their associated valuation allowances,
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
if any. We use
planning strategies, recent
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 $10.9 million for fiscal 2021. A
1% change in our effective tax rate used to compute deferred tax liabilities and assets, as recorded on the
September 30, 2021 consolidated balance sheet, would increase or decrease tax expense by approximately $124
million for fiscal 2021.
Pension
The funded status of our qualified and non-qualified U.S. and non-U.S. pension plans increased $353.4 million
in fiscal 2021. Our U.S. qualified and non-qualified pension plans were over funded by $387.9 million as of
September 30, 2021. Our non-U.S. pension plans were over funded by $17.2 million as of September 30, 2021.
Our U.S. pension plan benefit obligations were negatively impacted in fiscal 2021 primarily by a 1-basis point
decrease in the discount rate compared to the prior measurement date. The non-U.S. pension plan obligations
were positively impacted in fiscal 2021 by a 47-basis point increase in the discount rate compared to the prior
measurement date.
The determination of pension obligations and pension expense requires various assumptions that can
significantly affect liability and expense amounts, such as the expected long-term rate of return on plan assets,
discount rates, projected future compensation increases and mortality rates for each of our plans. These
assumptions are determined annually in conjunction with our actuary. The accounting for these matters involves
the making of estimates based on current facts, circumstances and assumptions that, in management’s judgment,
could change in a manner that would materially affect management’s future estimates with respect to such matters
and, accordingly, could cause our future reported financial condition and results of operations to differ materially
from those that we are currently reporting based on management’s current estimates.
55
A 25-basis point change in the discount rate, compensation level, expected long-term rate of return on plan
assets and interest crediting rate, factoring in our corridor (as defined herein) as appropriate, would have had the
following effect on fiscal 2021 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
Interest crediting rate
New Accounting Standards
Pension Plans
25 Basis
Point
Increase
25 Basis
Point
Decrease
$
$
$
$
(14.5) $
0.3 $
(16.7) $
0.4 $
15.2
(0.3)
16.7
(0.4)
See Note 1. Description of Business and Summary of Significant Accounting Policies of the Notes to
Consolidated Financial Statements for a full description of recent accounting pronouncements, including the
respective expected dates of adoption and expected effects on our results of operations and financial condition.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in, among other things, interest rates, foreign currencies and
commodity prices. We aim to identify and understand these risks and then implement strategies to manage them.
When evaluating these strategies, we evaluate the fundamentals of each market, our sensitivity to movements in
pricing, and underlying accounting and business implications. 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 12.1 million tons in our Corrugated Packaging
segment and approximately 4.1 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 91%. A hypothetical $10 per ton change in the price of
the year based on our capacity would impact our sales by
containerboard and paperboard throughout
approximately $121 million and $41 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 $903 million and $773 million on all energy sources in fiscal 2021 and 2020,
respectively to operate our facilities. The increase in energy costs in fiscal 2021 was primarily due to inflation.
Natural gas and electricity each account for approximately 30% to 40% of our energy purchases depending upon
56
pricing. While the amount of energy we consume may vary from year to year due to production levels and other
factors, in fiscal 2022 we expect to consume approximately 90 million MMBtu of natural gas. A hypothetical 10%
change in the price of energy throughout the year would impact our cost of energy by approximately $90 million
based on fiscal 2021 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. In fiscal 2021 and 2020, we consumed approximately 5.8 million and 5.5 million tons of
recycled fiber, respectively. 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. Recycled fiber prices increased in fiscal 2021 from prior year levels. While the
amount of recycled fiber we consume may vary from year to year due to production levels and other factors, in
fiscal 2022 we expect to consume approximately 5.9 million tons of recycled fiber. A hypothetical 10% change in
recycled fiber prices in our mills for a fiscal year would impact our costs by approximately $59 million.
Virgin Fiber
Virgin fiber is the principal raw material we use in the production of a portion of our containerboard, bleached
paperboard and market pulp. While virgin fiber prices have generally been more stable than recycled fiber prices,
they also fluctuate, particularly due to significant changes in weather, such as during prolonged periods of heavy
rain or drought, or during housing construction slowdowns or accelerations. Virgin fiber prices increased modestly
in fiscal 2021 from prior year levels. A hypothetical 10% change in virgin fiber prices in our mills for a fiscal year
would impact our costs by approximately $138 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. Freight costs increased in fiscal 2021, following a decline in freight costs in fiscal
2020, primarily due to inflation and supply constraints. A hypothetical 10% change in freight costs for fiscal 2021
and 2020 would impact our costs by approximately $190 million and $161 million, respectively. In fiscal 2022, we
expect to consume approximately 83 million gallons of diesel. 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, 2021 and 2020, including the impact of our interest rate swaps, if market interest rates
change an average of 100 basis points, our annual interest expense would be impacted by approximately $11
million and $13 million, respectively. 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 We Have Had
Significant Levels of Indebtedness in the Past and May Incur Significant Levels of Indebtedness in the
Future, Which 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, 2021 and 2020, the effect of a 1% change in exchange rates would impact Other income, net by
57
approximately $3 million for each year. 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 but currently have no active interest rate swaps or commodity forward contracts.
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. 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.
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 2021 and 2020, the effect of a 0.25% decrease in the discount rate would have reduced pre-tax
income by approximately $15 million and $13 million, respectively, and a 0.25% increase in the discount rate would
have increased pre-tax income by $15 million and $15 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.
Foreign Currency
We predominately operate in markets in the U.S., but derived 18.5% of our net sales in fiscal 2021 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 2021 and 2020, 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 $40 million
and $30 million, respectively. See Note 7. Segment Information of the Notes to Consolidated Financial
Statements for additional information.
During fiscal 2021 and 2020, the effect of a hypothetical 1% change in exchange rates would have impacted
accumulated other comprehensive income by approximately $30 million and $21 million, respectively. This impact
does not consider the effects of a stronger or weaker U.S. 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 U.S. 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.
58
Page
Reference
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61
62
63
64
65
65
76
78
80
83
94
98
101
102
102
103
103
105
109
111
112
112
116
118
118
122
124
127
129
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Description
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Balance Sheets
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Description of Business and Summary of Significant Accounting Policies
Revenue Recognition
Acquisitions and Investments
Restructuring and Other Costs
Retirement Plans
Income Taxes
Segment Information
Interest
Inventories
Note 1.
Note 2.
Note 3.
Note 4.
Note 5.
Note 6.
Note 7.
Note 8.
Note 9.
Note 10. Property, Plant and Equipment
Note 11. Other Intangible Assets
Note 12. Fair Value
Note 13. Debt
Note 14.
Note 15. Special Purpose Entities
Note 16. Related Party Transactions
Note 17. Commitments and Contingencies
Note 18. Accumulated Other Comprehensive Loss and Other Comprehensive Income (Loss)
Note 19. Stockholders’ Equity
Note 20. Share-Based Compensation
Note 21. Earnings Per Share
Leases
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
59
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
Loss (gain) on disposal of assets
Multiemployer pension withdrawal income
Land and Development impairments
Restructuring and other costs
Goodwill impairment
Operating profit (loss)
Interest expense, net
Loss on extinguishment of debt
Pension and other postretirement non-service income
Other income, net
Equity in income of unconsolidated entities
Income (loss) before income taxes
Income tax expense
Consolidated net income (loss)
Less: Net income attributable to noncontrolling interests
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
Year Ended September 30,
2020
2019
2021
$
$
18,746.1
15,315.8
3,430.3
17,578.8
14,381.6
3,197.2
$
18,289.0
14,540.0
3,749.0
1,759.3
357.1
4.1
(2.9)
31.5
1,281.2
(372.3)
(9.7)
134.9
10.9
40.9
1,085.9
(243.4)
842.5
(4.2)
838.3
$
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
3.16
$
(2.67) $
3.36
3.13
$
(2.67) $
3.33
$
$
$
See Accompanying Notes
60
WESTROCK COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
Consolidated net income (loss)
Other comprehensive income (loss), net of tax:
Foreign currency:
Year Ended September 30,
2020
2019
2021
$
842.5
$
(686.1) $
867.9
Foreign currency translation gain (loss)
124.3
(215.0)
(143.4)
Derivatives:
Deferred (loss) gain on cash flow hedges
Reclassification adjustment of net loss (gain) on cash
flow hedges 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 income (loss), net of tax
Comprehensive income (loss)
Less: Comprehensive income attributable to
noncontrolling interests
Comprehensive income (loss) attributable to common
stockholders
(0.1)
5.5
(10.0)
3.6
1.1
(0.2)
165.6
24.2
(248.5)
25.5
(4.2)
4.5
321.1
1,163.6
35.4
(19.6)
3.8
(177.6)
(863.7)
17.2
(3.3)
1.8
(375.3)
492.6
(4.5)
(4.5)
(3.6)
$
1,159.1
$
(868.2) $
489.0
See Accompanying Notes
61
WESTROCK COMPANY
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable (net of allowances of $68.1 and $66.3)
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 17)
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;
265.0 million and 260.4 million shares outstanding at September
30, 2021 and September 30, 2020, 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,
2021
2020
$
$
$
$
290.9
2,586.9
2,173.3
597.6
10.9
5,659.6
10,570.1
5,959.2
3,318.8
1,260.5
674.3
1,811.8
29,254.3
168.8
2,123.7
656.8
694.8
3,644.1
8,025.3
254.7
133.7
1,127.3
2,944.4
1,433.1
1.7
2.7
11,058.8
1,607.9
(999.1)
11,670.3
19.7
11,690.0
29,254.3
$
$
$
$
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
See Accompanying Notes
62
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
Issuance of common stock, net of stock received for 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 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 tax
withholdings (1)
Fair value of share-based awards issued in business combinations
Purchases of common stock (2)
Other
Balance at end of fiscal year
Retained Earnings:
Balance at beginning of fiscal year
Adoption of accounting standards (3)
Net income (loss) attributable to common stockholders
Dividends declared (per share - $0.88, $1.33 and $1.82) (4)
Issuance of common stock, net of stock received for 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,
2020
2019
2021
260.4
7.1
(2.5)
265.0
257.8
2.6
260.4
$
2.6
$
2.6
$
0.1
2.7
10,916.3
88.5
158.8
(103.7)
(1.1)
11,058.8
1,031.6
(3.8)
838.3
(236.3)
(0.5)
(21.4)
1,607.9
2.6
10,739.4
130.3
46.6
10,916.3
1,997.1
73.5
(690.9)
(348.1)
1,031.6
253.5
6.4
(2.1)
257.8
2.5
0.1
2.6
10,588.9
64.8
101.1
70.8
(86.2)
10,739.4
1,573.3
43.5
862.9
(479.8)
(0.4)
(2.4)
1,997.1
(1,319.9)
(1,069.2)
(695.3)
320.8
(999.1)
11,670.3
16.9
1.7
1.1
19.7
11,690.0
$
(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
$
(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 2021, we repurchased approximately 2.5 million shares of our Common Stock for an aggregate cost of $125.1 million (a portion of
which settled after September 30, 2021). In fiscal 2019, we repurchased approximately 2.1 million shares of our Common Stock for an
aggregate cost of $88.6 million.
For fiscal 2021, the amount relates to the adoption of ASU 2016-13 (as hereinafter defined). For fiscal 2020, the amount primarily relates
to the adoption of ASU 2018-02, “Income Statement Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax
Effects from Accumulated Other Comprehensive Income”. 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
63
WESTROCK COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
2021
Year Ended September 30,
2020
2019
$
842.5
$
(686.1)
$
867.9
(In millions)
Operating activities:
Consolidated net income (loss)
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 (benefit) expense
Share-based compensation expense
401(k) match and company contribution in common stock
Pension and other postretirement funding more than expense (income)
Cash surrender value increase in excess of premiums paid
Gain on sale of sawmill
Gain on sale of investment
Land and Development impairments
Goodwill impairment
Other impairment adjustments
Loss (gain) 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
Proceeds from corporate owned life insurance
Proceeds from sale of sawmill
Proceeds from sale of investment
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 additions (repayments)
Issuances of common stock, net of related tax withholdings
Purchases of common stock
Cash dividends paid to stockholders
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
$
See Accompanying Notes
64
1,460.0
(38.3)
88.6
136.1
(111.5)
(49.4)
(16.5)
(16.0)
34.6
3.7
(29.2)
(428.9)
(200.0)
(379.6)
430.3
0.7
552.8
2,279.9
(815.5)
44.9
58.5
29.5
6.3
3.2
(2.9)
(676.0)
435.0
(415.0)
259.9
(1,544.3)
23.1
18.2
(122.4)
(233.8)
(1.1)
(1,580.4)
16.3
39.8
251.1
290.9
$
1,487.0
16.1
43.0
130.3
20.8
(80.1)
(25.2)
1,333.2
25.8
(13.2)
(15.2)
30.5
21.8
(202.4)
(86.4)
(27.6)
98.4
2,070.7
(978.1)
16.9
35.0
6.5
(1.8)
(921.5)
598.6
428.0
(528.2)
696.4
(1,449.2)
(339.2)
(80.3)
22.2
(344.5)
(24.9)
(1,021.1)
(28.6)
99.5
151.6
251.1
$
1,511.2
17.3
37.1
64.2
(61.3)
(29.3)
13.0
38.3
(43.0)
(57.2)
272.9
(110.5)
(124.6)
(39.1)
7.2
(53.9)
2,310.2
(1,369.1)
(3,374.2)
33.2
119.1
25.5
(14.1)
(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)
3.8
1,780.2
4.0
(485.2)
636.8
151.6
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, WRKCo) for periods
prior to November 2, 2018.
WestRock is a multinational provider of sustainable fiber-based paper and packaging solutions. We partner
with our customers to provide differentiated, sustainable 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 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 preparation of financial statements in accordance with GAAP requires management to use judgment in
the application of accounting policies, including making estimates and assumptions. 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 investments
accounted for under the equity method or the measurement alternative method 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 2021, we corrected our interest, net of amounts capitalized supplemental disclosure for the prior
years by an immaterial amount. Certain amounts in prior periods have been reclassified to conform with the current
year presentation.
COVID-19 Pandemic
COVID-19 continues to evolve. The pandemic has affected our operational and financial performance to
varying degrees 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 (including due to new variants such as Delta), the actions taken to contain or
mitigate its impact (including the distribution and effectiveness of vaccines), and the direct and indirect economic
effects of the pandemic and related containment measures and government responses, among others. Our net
65
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
sales, primarily in the last half of fiscal 2020, were negatively impacted by COVID-19, and we have experienced
and are currently experiencing higher supply chain costs and tight labor markets in part due to the impacts of
COVID-19.
Ransomware Incident
As previously disclosed, on January 23, 2021 we detected a ransomware incident impacting certain of our
systems. Promptly upon our detection of this incident, we initiated response and containment protocols and our
security teams, supplemented by leading cyber defense firms, worked to remediate this incident. These actions
included taking preventative measures, including shutting down certain systems out of an abundance of caution,
as well as taking steps to supplement existing security monitoring, scanning and protective measures. We notified
law enforcement and contacted our customers to apprise them of the situation.
We undertook extensive efforts to identify, contain and recover from this incident quickly and securely. Our
teams worked to maintain our business operations and minimize the impact on our customers and teammates. In
our second quarter Form 10-Q, we announced that all systems were back in service. All of our mills and converting
locations began producing and shipping paper and packaging at pre-ransomware levels in March 2021 or earlier.
Our mill system production was approximately 115,000 tons lower than planned for the quarter ended March 31,
2021 as a result of this incident. While shipments from some of our facilities initially lagged behind production
levels, this gap closed as systems were restored during the second quarter of fiscal 2021. In locations where
technology issues were identified, we used alternative methods, in many cases manual methods, to process and
ship orders. We systematically brought our information systems back online in a controlled, phased approach.
We estimate the pre-tax income impact of the lost sales and operational disruption of this incident on our
operations in the second quarter of fiscal 2021 was approximately $50 million, as well as approximately $20 million
of ransomware recovery costs, primarily professional fees. In addition, we incurred approximately $9 million of
ransomware recovery costs in the third quarter of fiscal 2021. In the fourth quarter of fiscal 2021, we recorded a
$15 million credit for preliminary recoveries – approximately $10 million as a reduction of SG&A excluding
intangible amortization and approximately $5 million as a reduction of cost of goods sold. We expect to recover
substantially all of the remaining ransomware losses from cyber and business interruption insurance in future
periods. Disputes over the extent of insurance coverage for claims are not uncommon, and there will be a time lag
between the incurrence of costs and the receipt of any insurance proceeds.
In response to the ransomware event, we accelerated information technology investments that we had
previously planned to make in future periods in order to further strengthen our information security and technology
infrastructure. We engaged a leading cybersecurity defense firm that completed a forensics investigation of the
ransomware incident and we are taking appropriate actions in response to the findings. For example, in the short-
term, we reset all credentials Company-wide and strengthened security tooling across our servers and
workstations. Longer term, in collaboration with our strategic partners, we established a roadmap to advance the
maturity and effectiveness of our information security and resiliency capabilities. This roadmap includes initiatives
to further strengthen our information security posture across the Company, and to enable us to potentially detect,
respond to and recover from security and technical
incidents in a faster and more effective manner. More
specifically, we are progressing projects to bolster our security monitoring capabilities, strengthen our access
controls, reduce risks associated with third-parties, and to enhance the information security of our mills and plants.
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 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.
We use estimates in accounting for, among other things, impairment testing of goodwill and long-lived assets,
useful lives for depreciation and amortization, income tax expenses, deferred income tax assets and potential
income tax assessments, pension benefits, self-insured obligations, restructuring activities, fair values related to
business acquisition accounting, slow-moving and obsolete inventory, allowance for doubtful accounts, share-
based compensation and loss contingencies. Various assumptions and other factors underlie the determination of
these estimates. The process of determining significant estimates is fact specific and takes into account factors
66
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 results in the recognition of a 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 lifetime expected credit losses inherent in our accounts receivable at each balance sheet
date. Such an evaluation includes consideration of historical
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 are a party to accounts
receivable sales agreements to sell to third-party financial institutions all of the short-term receivables generated
from certain customer trade accounts. See “Note 12. Fair Value Accounts Receivable Sales Agreements”.
loss experience,
We state accounts receivable at the amount owed by the customer, net of an allowance for estimated credit
impairment losses, 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 a credit of $9.4 million in fiscal 2021
and expense of $19.9 million and $10.0 million in fiscal 2020 and 2019, respectively.
67
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 2021, 2020 and 2019 (in millions):
Balance at beginning of fiscal year
Reduction in sales and charges to costs and expenses
Deductions
Balance at end of fiscal year
Inventories
2021
2020
2019
$
$
66.3
236.5
(234.7)
68.1
$
$
53.2
270.8
(257.7)
66.3
$
$
49.7
259.6
(256.1)
53.2
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 36% and 37% of FIFO cost of all inventory at September 30, 2021 and 2020, respectively. See
“Note 9. Inventories” for additional information.
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, production levels, freight, handling costs,
and wasted materials (spoilage) that are determined to be abnormal. 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, Leases on October 1, 2019 using the modified retrospective
approach and, as a result, did not restate prior periods. See “Note 14. Leases” for additional information. 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 monthly basis for measurement of new lease liabilities.
We have made an accounting policy election to not recognize an ROU asset 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 we are
reasonably certain to exercise. In addition, the Company has applied the practical expedient to account for the
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lease and non-lease components as a single lease component for all of the Company's leases. See “Note 14.
Leases” for additional information.
Property, Plant and Equipment
We record property, plant and equipment at 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. 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:
less accumulated depreciation. Cost
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
In accordance with ASC 350, Intangibles Goodwill and Other, we review the carrying value of our goodwill
annually at the beginning of the fourth quarter of each fiscal year, or more often if events or changes in
circumstances indicate that the carrying amount may exceed fair value. We 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 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
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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 the 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.
During the fourth quarter of fiscal 2021, 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 12.0%. 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 by more than 20% 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
would have continued to exceed its carrying value.
At September 30, 2021, the North American Corrugated, Consumer Packaging, Brazil Corrugated and Victory
Packaging reporting units had $3,518.5 million, $2,295.9 million, $103.7 million and $41.1 million of goodwill,
respectively, which remained recoverable at the current year-end. 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, 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 ROU assets and amortizing intangibles other than goodwill,
is impaired. The ASC 360 test is a three-step test for assets that are “held and used” as that term is defined by
ASC 360. We determine whether indicators of impairment are present. We review long-lived assets for impairment
when events or changes in circumstances indicate that the carrying amount of the long-lived asset might not be
recoverable. If we determine that indicators of impairment are present, we determine whether the estimated
undiscounted cash flows for the potentially impaired assets are less than the carrying value. This requires
management to estimate future cash flows through operations over the remaining useful life of the asset and its
ultimate disposition. The assumptions we use to estimate future cash flows are consistent with the assumptions we
use for internal planning purposes, updated to reflect current expectations. If our estimated undiscounted cash
flows do not exceed the carrying value, we estimate the fair value of the asset and record an impairment charge if
the carrying value is greater than the fair value of the asset. We estimate fair value using discounted cash flows,
observable prices for similar assets, or other valuation techniques. We record assets classified as “held for sale” at
the lower of their carrying value or estimated fair value less anticipated costs to sell. Our long-lived assets,
including intangible assets remain recoverable.
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 15.6 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
the liabilities assumed, and any
Combinations”, we generally recognize the identifiable assets acquired,
noncontrolling interests in an acquiree at their fair values as of the date of acquisition. We measure goodwill as the
excess of consideration transferred, which we also measure at fair value, over the net of the acquisition date fair
values of the identifiable assets acquired and liabilities assumed. The acquisition method of accounting requires us
to make significant estimates and assumptions regarding the fair values of the elements of a business combination
as of the date of acquisition, including the fair values of identifiable intangible assets, deferred tax asset valuation
allowances, liabilities including those related to debt, pensions and other postretirement plans, uncertain tax
positions, contingent consideration and contingencies. Significant estimates and assumptions include subjective
and/or complex judgements regarding items such as discount rates, customer attrition rates, economic lives and
other factors, including estimating future cash flows that we expect to generate from the acquired assets.
The acquisition method of accounting also requires us to refine these estimates over a measurement period
not to exceed one year to reflect new information obtained about facts and circumstances that existed as of the
acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. If
we are required to adjust provisional amounts that we have recorded for the fair values of assets and liabilities in
connection with acquisitions, these adjustments could have a material impact on our financial condition and results
of operations. If the subsequent actual results and updated projections of the underlying business activity change
compared with the assumptions and projections used to develop these values, we could record future impairment
charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to
calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or
amortization expenses could be increased or decreased, or the acquired asset could be impaired.
Fair Value of Financial Instruments and Nonfinancial Assets and Liabilities
We estimate fair values in accordance with ASC 820, Fair Value Measurement.” We define fair value as the
price that would be received from the sale of an asset or paid to transfer a liability in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date.
Financial instruments not recognized at fair value on a recurring or nonrecurring basis include cash and cash
equivalents, accounts receivables, certain other current assets, short-term debt, accounts payable, certain other
current liabilities and long-term debt. With the exception of long-term debt, the carrying amounts of these financial
instruments approximate their fair values due to their short maturities. The fair values of our long-term debt are
estimated using quoted market prices or are based on the discounted value of future cash flows. We disclose the
fair value of long-term debt in Note 13. Debt and our pension and postretirement assets and liabilities in Note 5.
instruments recognized at fair value
Retirement Plans. We have, or from time to time may have, financial
including supplemental
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.
retirement savings plans (“Supplemental Plans”)
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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
from time to time and to varying degrees, we may enter into a variety of
We are exposed to interest rate risk, commodity price risk and foreign currency exchange risk. To manage
these risks,
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
instruments is
counterparties to the derivative agreements. Our credit exposure related to these financial
represented by the fair value of contracts reported as assets. We manage our exposure to counterparty credit risk
through minimum credit standards, diversification of counterparties and procedures to monitor concentrations of
credit risk. We may enter into financial derivative contracts that may contain credit-risk-related contingent features
which could result in a counterparty requesting immediate payment or demanding immediate and ongoing full
overnight collateralization on derivative instruments in net liability positions.
For financial derivative instruments that are designated as a cash flow hedge for accounting purposes, the
entire change in fair value of the financial derivative instrument is reported as a component of other comprehensive
income and reclassified into earnings in the same line item associated with the forecasted transaction, and in the
same period or periods during which the forecasted transaction affects earnings.
We have at times entered into interest rate swap agreements that effectively modified our exposure to interest
rate risk by converting a portion of our interest payments on floating rate debt to a fixed rate basis, thus reducing
the impact of interest rate changes on future interest expense. These agreements typically involved the receipt of
floating rate amounts in exchange for fixed interest rate payments over the life of the agreements without an
exchange of the underlying principal amount.
At September 30, 2021, the notional amount of foreign currency exchange contract derivative was $270.2
million. The fair value of this derivative instrument was not significant as of September 30, 2021. 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. See “Note 13. Debt” for additional information on the foreign currency derivatives.
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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
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 (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.
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,
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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 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 expense under the plan to earnings over each award’s individual vesting
period. Forfeitures are estimated based on historical experience. In fiscal 2020, in connection with our WestRock
Pandemic Action Plan we issued restricted stock grants to the majority of our employees to replace their annual
cash bonus. See Note 20. Share-Based Compensation for additional information.
Asset Retirement Obligations
for asset
We account
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, 2021 and
September 30, 2020, we had recorded liabilities of $73.6 million and $72.3 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, 2021 and 2020 were $110.7 million and $118.2 million, respectively. The assets
are recorded as Other assets on the Consolidated Balance Sheets.
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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 loss on foreign currency transactions of $0.7 million in fiscal 2021 and a gain on foreign currency
transactions of $6.6 million and $18.5 million in fiscal 2020 and 2019, 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 17. Commitments and Contingencies Environmental.”
New Accounting Standards Adopted in fiscal 2021
In November 2018,
the FASB issued Accounting Standards Update (“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” and ASC 606. The amendments in this ASU require
transactions between participants in a collaborative arrangement to be accounted for under ASC 606 only when
the counterparty is a customer. We adopted the provisions of ASU 2018-18 on October 1, 2020. The adoption did
not 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. We adopted the provisions of ASU 2018-17 on
October 1, 2020. The adoption did not 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): Customers 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
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. We adopted the provisions of ASU 2018-15 prospectively on
October 1, 2020. The adoption did not have a material impact on our consolidated financial statements.
that
In August 2018, the FASB issued ASU 2018-14 “Compensation Retirement Benefits Defined Benefit Plans
General (Subtopic 715-20): Changes to the Disclosure Requirements for Defined Benefit Plans”. The
amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or
other postretirement plans to remove disclosures that no longer are considered cost beneficial, clarify the specific
requirements of disclosures and add disclosure requirements identified as relevant. We adopted the provisions of
ASU 2018-14 retrospectively on October 1, 2020. The adoption did not 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 and replaces the incurred loss model with a model that reflects
expected credit losses. Subsequently, the FASB issued certain additional clarifications and narrow amendments to
ASU 2016-13 intended to make the standards easier to understand and eliminate certain inconsistencies. We
adopted ASU 2016-13 and its subsequent revisions using the modified retrospective transition approach on
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October 1, 2020. The adoption of ASU 2016-13 and its subsequent revisions resulted in us recognizing a
cumulative effect adjustment of $3.8 million (net of tax) decrease to opening balance of retained earnings related
to our allowance for doubtful accounts primarily for our trade accounts receivable balance.
New Accounting Standards Pending to be Adopted in Fiscal 2022
In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes”. This ASU removes certain exceptions from recognizing deferred taxes for investments, performing
intraperiod allocation and calculating income taxes in interim periods. It also reduces complexity in certain areas,
including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. 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 do not expect the adoption of this ASU to have a material
impact on our consolidated financial statements.
In July 2021, the FASB issued ASU 2021-05 “Leases (Topic 842): Lessors Certain Leases with Variable
Lease Payments”. This ASU requires lessors to classify leases as operating leases if they have variable lease
payments that do not depend on an index or rate and would have selling losses at lease commencement if they
were classified as sales-type or direct financing leases. For lessors that had adopted ASC 842 as of July 19, 2021,
when the amendments were issued, the amendments can be applied either retrospectively or prospectively and
are effective for annual periods beginning after December 15, 2021 (fiscal 2023 for us) and interim periods within
those annual periods. Early adoption is permitted. We plan to early adopt this ASU using the prospective transition
approach beginning October 1, 2021. We do not expect the adoption of this ASU 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 London Interbank Offered Rate (“LIBOR”) and other
interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. In January
2021, the FASB issued ASU 2021-01, which adds implementation guidance to clarify certain optional expedients in
Topic 848. The ASUs can be adopted after their respective issuance dates through December 31, 2022. We are
currently evaluating our contracts and the impact of optional expedients provided by these ASUs.
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 fiscal 2020, we completed our real estate monetization;
therefore, we did not have any Land and Development sales in fiscal 2021.
(In millions)
Primary Geographical Markets
North America
South America
Europe
Asia Pacific
Total
Corrugated
Packaging
Year Ended September 30, 2021
Land and
Development
Intersegment
Sales
Consumer
Packaging
Total
$ 11,813.7
457.6
5.1
67.3
$ 12,343.7
$
$
5,218.3
82.5
1,101.2
300.7
6,702.7
$
$
$
$
(299.1) $ 16,732.9
540.1
1,106.0
367.1
(300.3) $ 18,746.1
(0.3)
(0.9)
76
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In millions)
Primary Geographical Markets
North America
South America
Europe
Asia Pacific
Total
(In millions)
Primary Geographical Markets
North America
South America
Europe
Asia Pacific
Total
Revenue Contract Balances
Corrugated
Packaging
$ 10,975.8
393.1
7.9
42.4
$ 11,419.2
Corrugated
Packaging
$ 11,314.7
437.2
1.6
63.2
$ 11,816.7
$
$
$
$
Year Ended September 30, 2020
Land and
Development
Intersegment
Sales
Consumer
Packaging
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
Intersegment
Sales
Consumer
Packaging
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 Sheets.
(In millions)
Beginning balance - October 1, 2020
Ending balance - September 30, 2021
Increase
Performance Obligations and Significant Judgments
Contract Assets
(Short-Term)
Contract Liabilities
(Short-Term)
$
$
185.8
199.1
13.3
$
$
12.0
12.8
0.8
We primarily derive revenue from fixed consideration. Certain contracts may also include variable
consideration, typically in the form of cash discounts and volume rebates. If a contract with a customer includes
variable consideration, we estimate the expected cash discounts and other customer refunds based on historical
experience. We concluded this method is consistent with the most likely amount method under ASC 606 and
allows us to make the best estimate of the consideration we will be entitled to from customers.
Contracts or purchase orders with customers could include a single type of product or multiple types and
grades of products. Regardless, the contract price with the customer is agreed to at the individual product level
outlined in the customer contracts or purchase orders. Management has concluded that the prices negotiated with
each individual customer are representative of the stand-alone selling price of the product.
77
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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. The
measurement periods for all prior acquisitions were closed in fiscal 2020.
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 was 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
owned Victory Packaging, a packaging solutions distribution company with facilities in the U.S., Canada and
Mexico. We have included the financial results of KapStone in our Corrugated Packaging segment since the date
of the acquisition.
Pursuant to the KapStone Acquisition, at the Effective Time, (a) each issued and outstanding share of common
stock, par value $0.01 per share, of WRKCo was converted into one share of common stock, par value $0.01 per
share, of the Company (“Company common stock”) and (b) each issued and outstanding share of common
stock, par value $0.0001 per share, of KapStone (“KapStone common stock”) (other than shares of KapStone
common stock owned by (i) KapStone or any of its subsidiaries or (ii) any KapStone stockholder who properly
exercised appraisal rights with respect to its shares of KapStone common stock in accordance with Section 262 of
the Delaware General Corporation Law) was automatically canceled and converted into the right to receive (1)
$35.00 per share in cash, without interest (the “Cash Consideration”), or, at the election of the holder of such
share of KapStone common stock, (2) 0.4981 shares of Company common stock (the “Stock Consideration”) and
cash in lieu of fractional shares, subject to proration procedures designed to ensure that the Stock Consideration
would be received in respect of no more than 25% of the shares of KapStone common stock issued and
outstanding immediately prior to the Effective Time (the “Maximum Stock Amount”). Each share of KapStone
common stock in respect of which a valid election of Stock Consideration was not made by 5:00 p.m. New York
City time on September 5, 2018 was converted into the right to receive the Cash Consideration. KapStone
stockholders elected to receive Stock Consideration that was less than the Maximum Stock Amount and no
proration was required.
The consideration for the KapStone Acquisition was $4.9 billion including debt assumed, a long-term financing
obligation and assumed equity awards. As a result, KapStone stockholders received in the aggregate
approximately $3.3 billion in cash and 1.6 million shares of WestRock common stock with a value of $70.1 million,
or approximately 0.6% of the issued and outstanding shares of WestRock common stock immediately following the
Effective Time. Pursuant to the Merger Agreement, at the Effective Time, the Company assumed any outstanding
awards granted under the equity-based incentive plans of WRKCo and KapStone (including the shares underlying
such awards), the award agreements evidencing the grants of such awards and, in the case of the WRKCo equity-
based incentive plans, the remaining shares available for issuance under the applicable plan, in each case subject
to adjustments to such awards in the manner set forth in the Merger Agreement. Included in the consideration was
$70.8 million related to outstanding KapStone equity awards that were replaced with WestRock equity awards with
identical terms for pre-combination service. The amount related to post-combination service will be expensed over
the remaining service period of
the awards. See “Note 20. Share-Based Compensation” for additional
information on the converted awards.
78
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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):
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
Amounts
Recognized as of
the Acquisition
Date
Measurement
Period
Adjustments (1)
$
$
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
(30.2)
11.5
0.5
30.3
(0.1)
12.0
7.9
2.8
(1.4)
2.7
12.0
$
$
(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.
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
79
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
for a 25.0% ownership interest in the joint venture together with future put and call options. 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 had the right to exercise a right to purchase an additional 18.7% equity interest in the Joint
Venture from the Partners at a predetermined purchase price. We did not exercise this right. In addition, our joint
venture partners may call our 32.3% equity interest at a predetermined price between October 1, 2021 and April 1,
2022. At any time after April 1, 2022, we may elect to sell, and upon such election our joint venture partners will be
obligated to buy, all of our equity interest at a price as determined under the provisions of the agreement. Fiscal
2021 reflects a charge of $22.5 million associated with not exercising the option to purchase the additional equity
interest in Grupo Gondi that was recorded in Other income, net in the second quarter of fiscal 2021.
Note 4.
Restructuring and Other Costs
Summary of Restructuring and Other Initiatives
We recorded pre-tax restructuring and other costs of $31.5 million, $112.7 million and $173.7 million for fiscal
2021, 2020 and 2019, respectively. Of these costs, $12.6 million, $29.8 million and $56.5 million were non-cash for
fiscal 2021, 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 present our
restructuring and other costs in more detail below.
The following table summarizes our Restructuring and other costs for fiscal 2021, 2020 and 2019 (in millions):
Restructuring
Other
Restructuring and Other Costs
Restructuring
2021
2020
2019
$
$
28.5
3.0
31.5
$
$
93.7
19.0
112.7
$
$
111.0
62.7
173.7
Our restructuring charges are primarily associated with restructuring portions of our operations (i.e., partial or
complete plant closures). A partial plant closure may consist of shutting down a machine and/or a workforce
reduction. We generally incur various reduction in workforce actions, plant closure activities, impairment costs and
certain lease terminations in each fiscal year. In fiscal 2021, our restructuring charges also included an impairment
of assets and a gain on lease termination associated with our Richmond, VA regional office (in Corporate). In fiscal
2020, our restructuring charges also included those associated with reducing the capacity of our Consumer mill
system with the announced shutdown of an SBS machine at our Evadale, TX mill and employee costs due to
merger and acquisition-related workforce reductions and voluntary retirement programs in fiscal 2019 and 2020. In
fiscal 2019, charges also included 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
80
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 former 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.
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 initiatives, and our estimate of the total we expect to incur (in millions):
2021
2020
2019
Cumulative
Total
Expected
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
Net property, plant and equipment costs
Severance and other employee costs
Other costs
Restructuring total
Total
Net property, plant and equipment costs
Severance and other employee costs
Equipment and inventory relocation costs
Facility carrying costs
Other costs
Restructuring total
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 $
32.1 $
16.9
4.8
3.9
1.2
58.9 $
0.5 $
6.0
1.0
0.2
4.3
97.0 $
64.5
9.5
22.6
4.5
198.1 $
35.9 $
47.2
4.2
1.6
20.7
12.0 $
109.6 $
$
0.1
0.1 $
1.8 $
13.8
5.0
20.6 $
$
$
8.8 $
21.1
1.6
37.5
2.5
60.2
3.6
22.7 $
40.0 $
72.6 $
25.7 $
49.6
3.6
2.6
12.2
93.7 $
32.6 $
60.5
5.8
4.1
8.0
111.0 $
143.5 $
185.7
13.7
24.2
33.8
400.9 $
97.0
64.9
10.3
23.7
4.8
200.7
35.9
47.2
4.2
1.6
20.7
109.6
1.8
13.8
5.0
20.6
8.8
60.2
3.6
72.6
143.5
186.1
14.5
25.3
34.1
403.5
$
$
$
$
$
$
$
$
$
$
2.6 $
4.6
0.8
1.7
0.6
10.3 $
0.7 $
9.8
0.6
0.5
1.9
13.5 $
$
$
8.8 $
0.9
(5.0)
4.7 $
12.1 $
15.3
1.4
2.2
(2.5)
28.5 $
81
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
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
2021
2020
2019
$
$
0.5
1.7
0.8
3.0
$
$
0.2
18.7
0.1
19.0
$
$
28.2
34.3
0.2
62.7
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 Operations for the last three fiscal years
(in millions):
2021
2020
2019
Accrual at beginning of fiscal year
Additional accruals
Payments
Adjustment to accruals
Foreign currency rate changes and other
Accrual at end of fiscal year
$
$
17.2
17.4
(17.2)
(2.1)
(1.9)
13.4
$
$
32.3
51.3
(56.6)
(6.2)
(3.6)
17.2
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
(1) Other costs primarily includes lease and contract termination costs.
2021
2020
$
$
15.3
0.5
1.7
0.8
12.1
0.3
1.4
2.2
(2.8)
31.5
$
$
45.1
0.2
18.7
0.1
25.7
1.6
3.6
2.6
15.1
112.7
$
$
$
$
31.6
60.0
(55.9)
(3.2)
(0.2)
32.3
2019
56.8
28.2
34.3
0.2
32.6
6.8
5.8
4.1
4.9
173.7
82
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 5.
Retirement Plans
We have defined benefit pension plans and other postretirement benefit plans for certain U.S. and non-U.S.
employees. We use a September 30 measurement date for our plans. 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 ceased 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
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
2021
2020
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
19%
73%
1%
7%
100%
21%
74%
1%
4%
100%
19%
75%
1%
5%
100%
20%
72%
2%
6%
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
2021
2020
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
21%
71%
3%
5%
100%
21%
72%
2%
5%
100%
22%
72%
3%
3%
100%
21%
72%
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
83
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 expect to contribute approximately $25 million to our U.S. and non-U.S. pension plans in fiscal
2022. 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.
The weighted average assumptions used to measure the benefit plan obligations at September 30, were:
Discount rate
Interest crediting rate
Rate of compensation increase
Pension Plans
2021
2020
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
2.99%
3.48%
2.50%
2.63%
N/A
2.65%
3.01%
3.47%
2.50%
2.16%
N/A
2.68%
At September 30, 2021, 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, 2021 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 2022, our expected rate of return used to
determine net periodic benefit cost is 5.75% for our U.S. plans and 3.81% for our non-U.S. plans. Our expected
rates of return in fiscal 2022 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.
84
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table shows the changes in benefit obligation, plan assets and funded status for the years ended
September 30 (in millions):
Change in projected benefit obligation:
Benefit obligation at beginning of fiscal year
Service cost
Interest cost
Amendments
Actuarial loss (gain)
Plan participant contributions
Benefits paid
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
Settlements
Foreign currency rate changes
Fair value of plan assets at end of fiscal year
Funded status
Amounts recognized in the Consolidated Balance
Sheets:
Prepaid pension asset
Other current liabilities
Pension liabilities, net of current portion
Over (under) funded status at end of fiscal year
Pension Plans
2021
2020
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
$
$
$
$
$
$
$
5,264.5
42.5
154.6
5.0
20.7
(248.2)
5,239.1
5,369.7
491.9
13.6
(248.2)
5,627.0
387.9
566.8
(13.5)
(165.4)
387.9
$
$
$
$
$
$
$
1,471.5
8.6
32.7
0.6
(66.1)
1.9
(78.0)
(1.4)
68.7
1,438.5
1,418.0
38.7
9.6
1.9
(78.0)
(1.4)
66.9
1,455.7
17.2
107.5
(1.0)
(89.3)
17.2
$
$
$
$
$
$
$
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
290.6
(10.7)
(174.7)
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)
78.1
(1.1)
(130.5)
(53.5)
The actuarial
loss (gain) in the change in benefit obligation for the U.S. Plans and Non-U.S. Plans are
generally driven by a change in discount rates and to a lesser degree the rate of compensation change in the Non-
US. Plans.
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 $219.3 million, aggregate accumulated benefit
obligations of $219.3 million, and aggregate fair value of plan assets of $40.4 million at September 30, 2021. Our
qualified U.S. plans were in a net overfunded position at September 30, 2021.
The accumulated benefit obligation of U.S. and non-U.S. pension plans was $6,627.1 million and $6,682.2
million at September 30, 2021 and 2020, respectively.
85
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The pre-tax amounts in accumulated other comprehensive loss September 30 not yet recognized as
components of net periodic pension cost, including noncontrolling interest, consist of (in millions):
Net actuarial loss
Prior service cost
Total accumulated other comprehensive loss
Pension Plans
2021
2020
U.S. Plans
573.1
$
42.4
615.5
$
Non-U.S.
Plans
$
$
125.9
2.6
128.5
U.S. Plans
753.2
$
45.6
798.8
$
Non-U.S.
Plans
$
$
188.6
2.4
191.0
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
$
$
(208.0) $
(34.5)
5.6
(8.4)
(245.3) $
(26.2) $
(48.2)
25.0
(7.8)
(57.2) $
312.0
(25.3)
3.5
(5.2)
285.0
2021
Pension Plans
2020
2019
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
Settlement loss (gain)
Company defined benefit plan income
Multiemployer and other plans
Net pension income
2021
Pension Plans
2020
2019
$
$
$
51.1
187.3
(368.1)
34.2
8.4
0.4
(86.7)
1.6
(85.1) $
$
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)
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” and our “Net postretirement
cost” outlined in this note.
86
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
Interest crediting rate
Rate of compensation increase
Expected long-term rate of return on
plan assets
2021
Pension Plans
2020
2019
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
3.01%
3.47%
2.50%
2.16%
N/A
2.68%
3.35%
4.22%
3.00%
2.42%
N/A
2.65%
4.50%
4.15%
3.00%
3.42%
N/A
2.67%
6.00%
3.73%
6.25%
4.26%
6.50%
4.69%
For our U.S. pension and postretirement plans, we considered the mortality tables and improvement scales
published by the Society of Actuaries and evaluated our specific mortality experience to establish mortality
assumptions. Based on our experience and in consultation with our actuaries, for fiscal 2021, 2020 and 2019 we
utilized the base Pri-2012 mortality tables with specific gender and job classification increases applied for fiscal
2021 ranging from 6% to 13%, for fiscal 2020 ranging from 5% to 12% and for fiscal 2019 6% to 12%.
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 2021, 2020 and 2019. As of
September 30, 2021, these adjustment factors were updated to reflect the most recent mortality experience.
Our projected estimated benefit payments (unaudited), which reflect expected future service, as appropriate,
are as follows (in millions):
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal Years 2027 2031
Pension Plans
U.S. Plans
277.4
279.1
283.7
291.2
280.8
1,435.0
$
$
$
$
$
$
Non-U.S. Plans
76.1
$
76.5
$
76.0
$
76.3
$
75.7
$
378.4
$
87
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, 2021 (in millions):
Equity securities:
U.S. equities (1)
Non-U.S. equities (1)
Fixed income securities:
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
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Total
$
$
$
$
275.1
9.4
$
275.1
9.4
292.4
113.2
2,987.8
511.1
435.5
195.5
4,820.0
2,262.7
7,082.7
$
137.6
195.5
617.6
$
292.4
113.2
2,850.2
511.1
435.5
4,202.4
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):
Equity securities:
U.S. equities (1)
Non-U.S. equities (1)
Fixed income securities:
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
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Total
$
$
$
$
253.0
4.0
$
253.0
4.0
331.7
103.1
2,875.3
540.7
388.0
168.7
4,664.5
2,123.2
6,787.7
$
124.9
168.7
550.6
$
331.7
103.1
2,750.4
540.7
388.0
4,113.9
(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.
88
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, 2021 and 2020 (in millions):
September 30, 2021
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, 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)
Fair value
Redemption
Frequency
Redemption
Notice Period
Unfunded
Commitments
$
38.9
Monthly
Up to 30 days $
1,498.2
Monthly
Up to 60 days
725.6
2,262.7
Monthly
Up to 10 days
$
39.2
Monthly
Up to 30 days $
1,416.9
Monthly
Up to 60 days
667.1
2,123.2
Monthly
Up to 10 days
$
$
$
$
171.7
171.7
228.9
228.9
(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.
89
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Equity-related investments are hedged equity investments in a commingled fund that consist primarily of equity
in the form of short-term treasury
indexed investments which are hedged by options and also hold collateral
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
2021
2020
U.S.
Plans
2.98%
Non-
U.S. Plans
U.S.
Plans
Non-
U.S. Plans
6.45%
3.00%
4.84%
The following table shows the changes in benefit obligation, plan assets and funded status for the fiscal years
ended September 30 (in millions):
Change in projected benefit obligation:
Benefit obligation at beginning of fiscal year
Service cost
Interest cost
Amendments
Actuarial gain
Benefits paid
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
Underfunded Status
Amounts recognized in the Consolidated Balance
Sheets:
Other current liabilities
Postretirement benefit liabilities, net of current portion
Underfunded status at end of fiscal year
Postretirement Plans
2021
2020
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
93.6
0.6
2.8
(6.1)
(4.5)
86.4
$
$
$
4.5
(4.5)
$
(86.4) $
62.5
0.6
3.1
(8.1)
(2.8)
3.0
58.3
$
$
98.3
0.6
3.2
(0.1)
(3.1)
(5.3)
93.6
$
$
$
2.8
(2.8)
$
(58.3) $
$
5.3
(5.3)
$
(93.6) $
75.7
0.7
3.7
2.0
(5.3)
(2.9)
(11.4)
62.5
2.9
(2.9)
(62.5)
(8.2) $
(78.2)
(86.4) $
(2.8) $
(55.5)
(58.3) $
(8.0) $
(85.6)
(93.6) $
(2.7)
(59.8)
(62.5)
$
$
$
$
$
$
$
90
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
2021
2020
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
$
$
(16.1) $
(3.2)
(19.3) $
4.8
1.1
5.9
$
$
(10.6) $
(5.7)
(16.3) $
13.0
1.2
14.2
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
gain (loss)
Prior service cost arising during period
Amortization or curtailment recognition of prior service credit
Net other comprehensive (income) loss recognized
$
$
(14.2) $
(8.4) $
0.6
2.4
(11.2) $
(0.1)
1.9
2.7
(3.9) $
23.9
2.0
0.4
2.8
29.1
Postretirement Plans
2020
2019
2021
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 (gain) loss
Amortization of prior service credit
Net postretirement cost
Postretirement Plans
2020
2019
2021
$
$
1.2
5.9
(0.6)
(2.4)
4.1
$
$
1.3
6.9
0.1
(2.7)
5.6
$
$
1.2
7.7
(2.0)
(2.8)
4.1
The assumed health care cost
trend rates used in measuring the accumulated postretirement benefit
obligation (“APBO”) are as follows at September 30, 2021:
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
5.34%
4.00%
2047
6.00%
6.00%
2021
91
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
2021
Postretirement Plans
2020
2019
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
3.00%
N/A
4.84%
N/A
3.34%
N/A
5.64%
N/A
4.50%
N/A
6.61%
N/A
Our projected estimated benefit payments (unaudited), which reflect expected future service, as appropriate,
are as follows (in millions):
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal Years 2027 2031
Multiemployer Plans
Postretirement Plans
U.S. Plans
8.2
7.2
6.8
6.5
6.2
27.2
$
$
$
$
$
$
Non-U.S. Plans
2.8
$
2.9
$
2.9
$
3.0
$
3.0
$
16.1
$
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
liabilities. In fiscal 2018, we submitted formal notification to withdraw from PIUMPF and
potential withdrawal
Central States, and recorded estimated withdrawal liabilities for each. The PIUMPF estimated withdrawal liability
assumed both a payment for withdrawal liability and for our proportionate share of PIUMPF’s accumulated funding
deficiency. The estimated withdrawal liability excludes the potential impact of a future mass withdrawal of other
employers from PIUMPF, which was not considered probable or reasonably estimable and was discounted at a
credit adjusted risk free rate. Subsequently, we continued to refine the estimate of the withdrawal liability, the
impact of which was not significant. 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 dispute the PIUMPF accumulated funding
92
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
deficiency demands. We began making monthly payments (approximately $0.7 million per month for 20 years) for
these withdrawal liabilities in fiscal 2020, excluding the accumulated funding deficiency demands.
In July 2021, PIUMPF filed suit against us in the U.S. District Court for the Northern District of Georgia claiming
the right to recover our pro rata share of the pension fund’s accumulated funding deficiency. We believe we are
adequately reserved for this matter.
At September 30, 2021 and September 30, 2020, we had withdrawal liabilities recorded of $247.1 million and
respectively including liabilities associated with PIUMPF’s accumulated funding deficiency
$252.0 million,
demands.
With respect to certain other MEPPs, in the event we withdraw from one or more of the MEPPs in the future, it
is reasonably possible that we may incur withdrawal liabilities in connection with such withdrawals. Our estimate of
any such withdrawal liabilities, both individually and in the aggregate, are not material for the remaining plans in
which we participate.
Approximately 56% of our employees are covered by CBAs in the U.S. and Canada, of which approximately
26% are covered by CBAs that expire within one year and another 16% 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, 2021, 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 2021, 2020 and 2019, we recorded expense of $164.7 million, $150.1 million and
$150.9 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 to the WestRock Company 401(k) Retirement Savings Plan in Common
Stock effective July 1, 2020 and ending September 30, 2021 (final period funded in October 2021).
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, 2021, the
Supplemental Plans had assets totaling $191.0 million that are recorded at market value, and liabilities of $171.0
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.
93
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 6.
Income Taxes
The components of income (loss) before income taxes are as follows (in millions):
United States
Foreign
Income (loss) before income taxes
Impacts of the Tax Act
Year Ended September 30,
2020
2019
2021
$
$
822.4
263.5
1,085.9
$
$
(440.7) $
(81.9)
(522.6) $
891.6
253.1
1,144.7
On December 22, 2017, the U.S. enacted comprehensive tax legislation, commonly referred to as the Tax Act.
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. 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 our 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.
94
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Income tax expense consists of the following components (in millions):
Current income taxes:
Federal
State
Foreign
Total current expense
Deferred income taxes:
Federal
State
Foreign
Total deferred (benefit) expense
Total income tax expense
Year Ended September 30,
2020
2019
2021
$
$
171.2
27.2
78.4
276.8
(39.0)
(10.2)
15.8
(33.4)
243.4
$
$
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
During fiscal 2021, 2020 and 2019, cash paid for income taxes, net of refunds, were $271.9 million, $147.2
million and $226.1 million, respectively.
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
Excess tax benefit related to stock compensation
Research and development and other tax credits, net of
reserves
Income attributable to noncontrolling interest
Change in valuation allowance
Nondeductible transaction costs
Goodwill impairment
Nontaxable increased cash surrender value
Withholding taxes
FDII
Deferred rate change
Brazilian net worth deduction
Other, net
Effective tax rate
Year Ended September 30,
2020 (1)
2021
2019
21.0%
0.9
0.1
2.0
0.2
(0.5)
0.1
2.8
(1.1)
0.2
(1.2)
(1.0)
(0.7)
(0.4)
22.4%
21.0%
(1.1)
2.7
(0.3)
(0.5)
3.7
0.1
(4.1)
(51.2)
1.3
(0.7)
1.3
(1.8)
1.7
(3.4)
(31.3)%
21.0%
1.3
1.2
2.9
(0.3)
(0.7)
(0.1)
0.2
1.0
(0.6)
0.6
(0.5)
(0.4)
(0.9)
(0.5)
24.2%
(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 fiscal 2021 and 2019.
95
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
Pension
Right-of-use assets
Total
Valuation allowances
Net deferred income tax liability
September 30,
2021
2020
$
$
6.7
119.0
57.5
84.9
193.6
30.2
177.1
42.1
711.1
1,805.2
796.6
243.5
272.8
32.9
36.3
164.9
3,352.2
277.5
2,918.6
$
$
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
Deferred taxes are recorded as follows in the Consolidated Balance Sheets (in millions):
Long-term deferred tax asset (1)
Long-term deferred tax liability
Net deferred income tax liability
September 30,
2021
2020
$
$
25.8
2,944.4
2,918.6
$
$
33.8
2,916.9
2,883.1
(1) The long-term deferred tax asset is presented in Other assets on the Consolidated Balance Sheets.
At September 30, 2021 and September 30, 2020, we had gross U.S.
federal net operating losses of
approximately $2.7 million and $2.6 million, respectively. These loss carryforwards generally expire between fiscal
2031 and 2038.
At September 30, 2021 and September 30, 2020, we had gross state and local net operating losses, of
approximately $1,190 million and $1,461 million, respectively. These loss carryforwards generally expire between
fiscal 2022 and 2040. The tax effected values of these net operating losses are $57.5 million and $67.0 million at
September 30, 2021 and 2020, respectively, exclusive of valuation allowances of $20.4 million and $12.7 million at
September 30, 2021 and 2020, respectively.
At September 30, 2021 and September 30, 2020, gross net operating losses for foreign reporting purposes of
approximately $779.1 million and $765.1 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 $193.0 million and $187.7 million at September 30, 2021
and 2020, respectively, exclusive of valuation allowances of $177.6 million and $165.9 million at September 30,
2021 and 2020, respectively.
96
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At September 30, 2021 and 2020, we had state tax credit carryforwards of $84.9 million and $79.4 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 $76.3 million and $71.9 million at
September 30, 2021 and 2020, 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
2021, 2020 and 2019 (in millions):
Balance at beginning of fiscal year
Increases
Allowances related to acquisition accounting (1)
Reductions
Balance at end of fiscal year
(1) Amounts in fiscal 2019 relate to the KapStone Acquisition.
2021
2020
2019
$
$
257.5
22.2
(2.2)
277.5
$
$
218.0
46.2
(6.7)
257.5
$
$
229.4
25.4
0.8
(37.6)
218.0
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, 2021, we estimate our outside basis difference in foreign subsidiaries that are considered
indefinitely reinvested to be approximately $1.4 billion. The components of the outside basis difference are
comprised of acquisition accounting adjustments, undistributed earnings, and equity components. 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, 2021, 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)
Additions (reductions) for currency translation adjustments
Reductions as a result of a lapse of the applicable statute of
limitations
Balance at end of fiscal year
(1) Amounts in fiscal 2019 relate to the KapStone Acquisition.
2021
2020
2019
$
$
$
206.7
2.7
10.8
1.5
$
224.3
5.0
11.7
(16.7)
(8.8)
(22.2)
199.5
$
(8.8)
206.7
$
127.1
1.0
103.8
1.8
(0.5)
(4.0)
(1.7)
(3.2)
224.3
(2) Additions for tax positions taken in fiscal 2019 and reductions taken in fiscal 2020 include primarily positions taken related
to foreign subsidiaries.
(3) Amounts in fiscal 2019 relate to the settlements of state and foreign audit examinations.
97
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of September 30, 2021 and 2020, the total amount of unrecognized tax benefits was approximately $199.5
million and $206.7 million, respectively, exclusive of interest and penalties. Of these balances, as of September 30,
2021 and 2020, if we were to prevail on all unrecognized tax benefits recorded, approximately $188.7 million and
$189.5 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 17. Commitments and Contingencies — Brazil Tax Liability”.
As of September 30, 2021 and 2020, we had liabilities of $79.7 million and $72.4 million, respectively, related
to estimated interest and penalties for unrecognized tax benefits. Our results of operations for the fiscal year ended
September 30, 2021, 2020 and 2019 include expense of $4.4 million, $6.6 million and $9.7 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, 2021, it is reasonably possible that our unrecognized tax benefits will decrease by
up to $31.5 million in the next twelve months due to expiration of various statutes 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 two 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; and Consumer Packaging, which consists of our
consumer mills, food and beverage and partition operations. Prior to the completion of our monetization program in
fiscal 2020, we had a third reportable segment, Land and Development, which previously sold real estate, primarily
in the Charleston, SC region. 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.
In the first quarter of fiscal 2022, we expect to realign our segments and will disclose three reportable
segments: Packaging, which will consist of our converting operations and associated integrated profit from our mill
system; Paper, which will consist of third-party paper sales and associated profit from our mill system; and
Distribution, which will consist of our distribution business combined with our merchandising display assembly
operations.
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,
2020
2019
2021
Foreign net sales to unaffiliated customers
Foreign segment income
Foreign long-lived assets
$
$
$
3,466.9
397.6
1,501.3
$
$
$
3,105.6
298.2
1,390.6
$
$
$
3,332.4
392.3
1,466.4
Foreign operations as a percent of consolidated operations:
Foreign net sales to unaffiliated customers
Foreign segment income
Foreign long-lived assets
18.5%
25.3%
14.2%
17.7%
21.9%
12.9%
18.2%
21.9%
13.1%
98
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):
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
Land and Development impairments
Restructuring and other costs
Goodwill impairment
Non-allocated expenses
Interest expense, net
Loss on extinguishment of debt
Other income, net
Income (loss) before income taxes
Depreciation and amortization:
Corrugated Packaging
Consumer Packaging
Corporate
Total
$
$
$
$
$
$
$
$
$
$
Years Ended September 30,
2020
2019
2021
12,343.7
6,702.7
19,046.4
87.2
213.1
300.3
12,256.5
6,489.6
18,746.1
1,116.8
457.3
1,574.1
0.9
2.9
(31.5)
(89.4)
(372.3)
(9.7)
10.9
1,085.9
$
$
$
$
$
$
$
$
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
Years Ended September 30,
2020
2019
2021
926.6
527.8
5.6
1,460.0
$
$
951.4
529.5
6.1
1,487.0
$
$
950.6
552.1
8.5
1,511.2
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
99
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 Flows 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 Statements 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 was reduced by $24.7 million 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,
2020
2019
2021
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
$
$
$
$
$
$
$
$
$
$
16,691.0
9,553.3
10.9
2,999.1
29,254.3
3,663.3
2,295.9
5,959.2
1,240.9
2,077.9
3,318.8
500.7
284.1
30.7
815.5
434.4
18.5
0.4
453.3
$
$
$
$
$
$
$
$
$
$
16,507.0
9,584.9
7.0
2,680.8
28,779.7
3,673.5
2,288.7
5,962.2
1,423.0
2,244.2
3,667.2
731.1
217.1
29.9
978.1
414.3
14.9
0.4
429.6
$
$
$
$
$
$
$
$
$
$
16,681.1
11,038.7
28.3
25.8
2,382.8
30,156.7
3,695.0
3,590.6
7,285.6
1,655.1
2,404.4
4,059.5
961.4
365.9
41.8
1,369.1
457.1
11.6
0.4
469.1
The Corrugated Packaging segment’s equity method investments primarily relate to the Grupo Gondi
investment. Equity method investments are included in the Consolidated Balance Sheets in Other assets. The
investment in Grupo Gondi that in fiscal 2021 and 2020 exceeds our proportionate share of the underlying equity in
net assets by approximately $105.7 million and $101.7 million, respectively. Approximately $40.2 million and $41.9
million remains amortizable to expense in Equity in income of unconsolidated entities over the estimated life of the
underlying assets ranging from 10 to 15 years beginning with our investment in fiscal 2016. The Gondi investment
is denominated in Mexican Pesos.
100
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The changes in the carrying amount of goodwill for the fiscal years ended September 30, 2021, 2020 and 2019
are as follows (in millions):
Balance as of October 1, 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
Goodwill disposed of
Translation adjustments
Balance as of September 30, 2021
Goodwill
Accumulated impairment losses
Corrugated
Packaging
Consumer
Packaging
Total
$
$
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)
3,673.6
(0.1)
3,673.5
(16.4)
6.2
$
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
3,664.6
(1,375.9)
2,288.7
7.2
3,663.4
(0.1)
3,663.3
$
3,671.8
(1,375.9)
2,295.9
$
$
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
(16.4)
13.4
7,335.2
(1,376.0)
5,959.2
During the fourth quarter of fiscal 2020, we recorded a $1,333.2 million pre-tax non-cash goodwill impairment
of our Consumer Packaging reporting unit. 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 had experienced significant declines in demand for those products that we believed were more
systemic and our view of related growth and earnings opportunities had been diminished.
During the fourth quarter of fiscal 2021, we completed our annual goodwill impairment testing. Each of our
reporting units had fair values that exceeded their respective carrying values by more than 20% each. See “Note 1.
Description of Business and Summary of Significant Accounting Policies Goodwill and Long-Lived
Assets” for a discussion of our fiscal 2021 impairment test.
The goodwill acquired in fiscal 2019 primarily related to the KapStone Acquisition in the Corrugated Packaging
segment.
Note 8.
Interest
The components of interest expense, net is as follows (in millions):
Interest expense
Interest income
Interest expense, net
Years Ended September 30,
2020
2019
2021
(418.9) $
(465.5) $
46.6
72.0
(372.3) $
(393.5) $
(489.4)
58.1
(431.3)
$
$
101
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cash paid for interest, net of amounts capitalized, of $384.7 million, $423.4 million and $443.9 million were
made during fiscal 2021, 2020 and 2019, respectively.
During fiscal 2021, 2020 and 2019, we capitalized interest of $14.0 million, $24.6 million and $23.8 million,
respectively.
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
September 30,
2021
2020
$
$
972.7
888.1
536.4
2,397.2
(223.9)
2,173.3
$
$
844.2
772.7
500.3
2,117.2
(93.8)
2,023.4
It is impracticable to segregate the LIFO reserve between raw materials, finished goods and work in process.
In fiscal 2021, 2020 and 2019, 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, higher costs prevailing in prior years increases costs of goods sold. The impact of the
liquidations in fiscal 2021, 2020 and 2019 was not significant.
In fiscal 2021, we experienced higher inventory costs primarily due to inflation, the effect of which increased
cost of goods sold and our LIFO reserve by $130.1 million.
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,
2021
2020
$
$
2,626.0
15,853.1
120.0
26.1
93.9
18,719.1
(8,149.0)
10,570.1
$
$
2,524.7
15,147.3
110.8
29.1
103.6
17,915.5
(7,136.6)
10,778.9
Depreciation expense for fiscal 2021, 2020 and 2019 was $1,069.7 million, $1,054.9 million and $1,074.6
million, respectively. Non-cash additions to property, plant and equipment at September 30, 2021, 2020 and 2019
were $108.5 million, $85.0 million and $219.9 million, respectively.
102
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):
Customer relationships
Trademarks and tradenames
Favorable contracts
Technology and patents
License costs
Non-compete agreements
Other
Total
September 30,
2021
2020
Weighted
Avg. Life
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
15.6 $
22.0
11.6
10.7
2.0
29.5
15.6 $
5,429.3 $
130.8
44.0
37.7
26.5
5.2
4.0
5,677.5 $
(2,190.6) $
(71.3)
(44.0)
(23.6)
(25.4)
(3.5)
(0.3)
(2,358.7) $
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)
Estimated intangible asset amortization expense for the succeeding five fiscal years is as follows (in millions):
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
$
$
$
$
$
352.4
345.8
324.5
309.9
302.4
Intangible amortization expense was $360.6 million, $405.4 million and $408.0 million during fiscal 2021, 2020
and 2019, respectively. We had other intangible amortization expense, primarily for packaging equipment leased
to customers of $29.7 million, $26.7 million and $28.6 million during fiscal 2021, 2020 and 2019, 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.
Fiscal 2021 reflects a charge of $22.5 million associated with not exercising an option to purchase an
additional equity interest in Grupo Gondi that was recorded in Other income, net in the second quarter of fiscal
2021.
103
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Financial Instruments Not Recognized at Fair Value
Financial instruments not recognized at fair value on a recurring or nonrecurring basis include cash and cash
equivalents, accounts receivable, certain other current assets, short-term debt, accounts payable, certain other
current liabilities and long-term debt. With the exception of long-term debt, the carrying amounts of these financial
instruments approximate their fair values due to their short maturities.
Accounts Receivable Sales Agreements
We are a party to an accounts receivable sales agreement to sell to a third-party financial institution all of the
short-term receivables generated from certain customer trade accounts (the “A/R Sales Agreement”). On
September 17, 2020, we amended the then existing agreement and increased the purchase limit to $700.0 million.
The terms of the A/R Sales Agreement limit the balance of receivables sold to the amount available to fund such
receivables sold, thereby eliminating the receivable for proceeds from the financial institution at any transfer date.
On August 31, 2021, we further amended the A/R Sales Agreement to extend the maturity date to September 16,
2022. 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”. We also have a similar facility that we entered
into on December 4, 2020, that has a $88.5 million purchase limit, is uncommitted and has a one year term. The
customers from these facilities are not included in the Receivables Securitization Facility that is discussed in “Note
13. Debt”.
The following table represents a summary of these accounts receivable sales agreements for fiscal 2021 and
2020 (in millions):
Receivable from financial institutions at beginning of fiscal year
Receivables sold to the financial institutions and derecognized
Receivables collected by financial institutions
Cash proceeds from (payments to) financial institutions
Receivable from financial institutions at September 30,
2021
2020
$
$
$
(2,732.2)
2,655.6
76.6
$
(2,446.2)
2,449.4
(3.2)
Receivables sold under these accounts receivable sales agreements as of the respective balance sheet dates
were approximately $665.9 million and $589.4 million as of September 30, 2021 and September 30, 2020,
respectively.
Cash proceeds related to the receivables sold are included in cash from operating activities in the
Consolidated Statements 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 $11.1 million, $12.7 million and $17.3 million in
fiscal 2021, 2020 and 2019, 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 7.
Segment Information” for a discussion of a $1,333.2 million pre-tax non-cash goodwill
impairment of our
Consumer Packaging reporting unit recorded in fiscal 2020. 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 2021, 2020 and 2019, 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 $13.0 million pre-tax
104
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
non-cash impairment of certain mineral rights in fiscal 2019 following the termination of a third-party leasing
relationship.
Note 13. Debt
The public bonds issued by WRKCo, 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, 2021, 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):
Public bonds due fiscal 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
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
September 30, 2021
September 30, 2020
Weighted Avg
Interest Rate
N/A
4.0%
4.5%
6.2%
3.0%
1.1%
4.1%
N/A
4.8%
4.0%
Carrying
Value
$
$
3,778.2
2,766.5
178.2
598.9
270.0
264.1
113.1
225.1
8,194.1
168.8
8,025.3
Carrying
Value
Weighted Avg
Interest Rate
$
$
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%
4.0%
N/A
3.1%
3.8%
On September 10, 2021, we redeemed $400 million aggregate principal amount of our 4.900% senior notes
due March 2022 using cash and cash equivalents and recorded a $8.6 million loss on extinguishment of debt.
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, 2021. 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, 2021,
excluding the step-up, the weighted average interest rate on total debt was 4.2%. At September 30, 2021, the
unamortized fair market value step-up was $192.4 million, which will be amortized over a weighted average
remaining life of 10.6 years. At September 30, 2021, we had $63.2 million of outstanding letters of credit not drawn
upon. At September 30, 2021, we had approximately $3.7 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 $9.0 billion and $10.4 billion as of September 30, 2021 and September 30,
2020, 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 2021, 2020 and 2019,
amortization of debt issuance costs charged to interest expense were $8.3 million, $8.2 million and $7.8 million,
respectively.
105
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Public Bonds / Notes Issued
At September 30, 2021 and September 30, 2020, the face value of our public bond obligations outstanding
were $6.6 billion and $7.0 billion, respectively.
On June 1, 2020, WRKCo issued $600.0 million aggregate principal amount of its 3.00% Senior Notes
due 2033 (the “June 2033 Notes”) in a registered offering pursuant to the Company’s automatic shelf registration
statement on Form S-3 under the Securities Act of 1933, as amended, (the “Securities Act”). The 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 amounts then
outstanding under our 3-year term loan with Wells Fargo, as administrative agent.
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 December 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 December 2018 Notes were used
primarily to prepay a portion of the amounts then outstanding under our term loans with Wells Fargo, as
administrative agent.
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.
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
106
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, 2021 and September 30, 2020,
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.
European Revolving Credit Facility
On February 26, 2021, we amended and replaced our existing European revolving credit
facility with
Coöperatieve Rabobank U.A., New York Branch, as administrative agent. The amendments included, among other
things, increasing the facility to €600.0 million while maintaining the incremental €100.0 million accordion feature.
This facility provides for a three-year unsecured U.S. dollar, Euro and British Pound denominated borrowing of not
more than €600.0 million maturing on February 26, 2024. At September 30, 2021, we had borrowed $270.0 million
under this facility and entered into foreign currency exchange contracts of $270.2 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
Operations. At September 30, 2020, we had borrowed $250.0 million under the then-existing facility.
Receivables Securitization Facility
On March 12, 2021, we amended our $700.0 million receivables securitization agreement (the “Receivables
Securitization Facility”) entered into on May 2, 2019 (subsequently amended March 27, 2020) to, among other
things, extend its maturity date from May 2, 2022 to March 11, 2024 and establish the transition to the Secure
Overnight Funding Rate at a future date from a blend of the market rate for asset-backed commercial paper and
the one-month LIBOR rate plus a credit spread, and revising certain fees. 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, 2021. 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, 2021 and September 30, 2020 there were no amounts outstanding under this facility. At September
30, 2021 and September 30, 2020, maximum available borrowings, excluding amounts outstanding under the
Receivables Securitization Facility, were $690.3 million and $700.0 million, respectively. The carrying amount of
accounts receivable collateralizing the maximum available borrowings at September 30, 2021 and September 30,
2020 were approximately $1,318.4 million and $1,128.3 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 current 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 0.90%. The commitment fee was 0.35% and 0.25%
as of September 30, 2021 and September 30, 2020, 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
107
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, 2021 and 2020, there was no amount outstanding.
Term Loans
At September 30, 2020, there was $648.9 million outstanding on the five-year unsecured term loan we entered
into with Wells Fargo, as administrative agent, on March 7, 2018. During the first quarter of fiscal 2021, we paid off
the term loan primarily using cash on hand.
On June 7, 2019, we entered into a $300.0 million credit agreement providing for a five-year unsecured term
loan with Bank of America, N.A., as administrative agent. The facility was scheduled to mature on June 7, 2024. At
September 30, 2020, the outstanding balance of this facility was $300.0 million. In December 2020 and May 2021,
we repaid $50.0 million and $250.0 million, respectively, using cash and cash equivalents which resulted in the
facility being terminated.
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, that replaced
our then-existing facility. The Farm Loan Credit Agreement provides for a seven-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 Guarantor Subsidiaries. The carrying value of
this facility at September 30, 2021 and
September 30, 2020 was $598.9 million and $598.7 million, respectively.
Brazil Export Credit Note
On January 18, 2021, we entered into a credit agreement to provide for R$500.0 million of a senior unsecured
term loan of WestRock Celulose, Papel E Embalagens Ltda. (a subsidiary of the Company), as borrower, and the
Company, as guarantor. The outstanding amount of the principal will be repaid in equal, semiannual installments
beginning on January 19, 2023 until the facility matures on January 19, 2026. The proceeds of the facility are to be
used to support the production of goods or acquisition of inputs that are essential or ancillary to export activities.
Loans issued under the facility will bear interest at a floating rate based on Brazil’s Certificate of Interbank Deposit
rate plus a spread of 2.50%. At September 30, 2021, there was R$500.0 million ($92.3 million) outstanding.
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 was available to 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, 2021 and 2020, the carrying value of the facility was R$639.2 million ($118.0 million) and R$695.1
million ($123.0 million), respectively.
108
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Aggregate Maturities of Debt
As of September 30, 2021, the aggregate maturities of debt, excluding finance lease obligations, for the
succeeding five fiscal years and thereafter are as follows (in millions):
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Thereafter
Fair value of debt step-up, deferred financing costs and unamortized
bond discounts
Total
$
$
160.2
420.5
837.7
627.0
1,363.4
4,379.1
142.1
7,930.0
See “Note 14. 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. Leases
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
Years Ended September 30,
2020
2021
$
$
211.0
104.6
(8.9)
9.6
7.2
323.5
$
$
201.2
105.5
(6.7)
10.5
7.9
318.4
Rental expense for the year ended September 30, 2019 was approximately $346.7 million including lease
payments under cancelable leases and maintenance charges on transportation equipment.
109
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,
2021
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
$
$
$
$
$
$
$
676.0
177.9
537.9
715.8
143.2
(28.3)
114.9
8.7
255.4
264.1
$
$
$
$
$
$
$
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,
2021
2020
5.4 years
8.3 years
5.9 years
9.0 years
2.4%
4.1%
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
Years Ended September 30,
2021
2020
$
$
$
$
227.0
8.3
9.1
$
$
$
204.1
7.8
10.1
160.9
$
124.4
110
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):
September 30, 2021
Operating
Leases
Finance Leases
Total
$
$
191.5
159.6
126.0
93.2
66.9
132.5
769.7
(53.9)
715.8
$
$
15.5
13.5
12.2
12.0
11.9
274.1
339.2
(75.1)
264.1
$
$
207.0
173.1
138.2
105.2
78.8
406.6
1,108.9
(129.0)
979.9
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Thereafter
Total lease payments
Less: Interest (1)
Present value of future lease payments
(1) Calculated using the interest rate for each lease.
Note 15. 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 strategic combination of Rock-Tenn
Company and MeadWestvaco Corporation’s respective businesses (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
2021 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.
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, 2021, the Timber Note was $376.0 million and is included
within Restricted assets held by special purpose entities on the Consolidated Balance Sheets and the secured
financing liability was $327.8 million and is included within Non-recourse liabilities held by special purpose entities
on the Consolidated Balance Sheets.
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, 2021, no event had occurred that would allow for the
111
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 2021 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, 2021, the Installment Note was $884.5 million and is
included within Restricted assets held by special purpose entities on the Consolidated Balance Sheets and the
secured financing liability was $799.5 million and is included within Non-recourse liabilities held by special purpose
entities on the Consolidated Balance Sheets.
Note 16. Related Party Transactions
We sell products to affiliated companies. Net sales to the affiliated companies for the fiscal years ended
September 30, 2021, 2020 and 2019 were approximately $237.7 million, $311.5 million and $368.4 million,
respectively. Accounts receivable due from the affiliated companies at September 30, 2021 and 2020 was $33.5
million and $23.3 million, respectively, and was included in Accounts receivable on our Consolidated Balance
Sheets.
Note 17. Commitments and Contingencies
Capital Additions
Estimated costs for future purchases of fixed assets that we are obligated to purchase as of September 30,
2021 total approximately $249 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 and
disposal 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 numerous and more complex environmental programs
and regulations, but all of WestRock’s manufacturing facilities have environmental compliance obligations. We
have incurred, and expect that we will continue to incur, significant capital, operating and other expenditures
complying with applicable environmental laws and regulations including, for example, projects to replace and/or
upgrade our air pollution control devices, wastewater treatment systems, and other environmental infrastructure.
Changes in these laws, as well as litigation relating to these laws, could result in more stringent or additional
environmental compliance obligations for the Company that may require additional 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.
112
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 contamination exists, 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
liability is authorized under CERCLA, liability is
under CERCLA and analogous laws. While joint and several
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 impact our
results of operations, financial condition or cash flows.
We believe that we can assert claims for indemnification pursuant to existing rights we have under certain
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.
As of September 30, 2021, we had $4.8 million reserved for environmental liabilities on an undiscounted basis,
of which $1.7 million is included in Other long-term liabilities and $3.1 million is included in Other current liabilities
on the Consolidated Balance Sheets, 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, 2021.
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 seven to eight million tons of paper
and packaging from landfills where it would otherwise degrade and release greenhouse gases in the form of
methane. 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.
Addressing issues related to climate change presents opportunities for our business. For example, we produce
renewable energy and generate RECs at our integrated kraft mills. We have sold RECs in the past and may sell
them in the future. The RECs we generate are flexible, market-based tools that support the renewable energy
market. 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 supplies and 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
113
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
Responses to climate change may result in regulatory risks as new laws and regulations aimed at reducing
GHG emissions 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 programs. 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 the Paris
Agreement, which became effective in November 2016 and to which the United States formally rejoined in
February 2021.
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.
Litigation
During fiscal 2018, we submitted formal notification to withdraw from the PIUMPF and recorded a liability
associated with the withdrawal. Subsequently, in fiscal 2019 and 2020, we received demand letters from PIUMPF,
including a demand for withdrawal liabilities and for our proportionate share of PIUMPF’s accumulated funding
deficiency, and we refined our liability, the impact of which was not significant. We began making monthly
payments for the PIUMPF withdrawal
liabilities in fiscal 2020, excluding the accumulated funding deficiency
demands. We dispute the PIUMPF accumulated funding deficiency demands. 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. Similarly, in April 2020, we received an updated demand letter related to a
subsidiary of ours asserting that we owe $1.3 million of additional accumulated funding deficiency, including
interest. In July 2021, the PIUMPF filed suit against us in the U.S. District Court for the Northern District of Georgia
claiming the right to recover our pro rata share of the pension fund’s accumulated funding deficiency. We believe
we are adequately reserved for this matter. See “Note 5. Retirement Plans Multiemployer Plans” of the Notes
to Consolidated Financial Statements for more information regarding our withdrawal liabilities.
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, 2021, there were
approximately 1,600 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,
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, 2021, we had $15.2 million reserved for these matters.
In any given period or periods, however,
financial condition or cash flows.
it
114
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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$701 million ($129 million) as of September 30,
2021, 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
lessors in certain facilities and
certain unconsolidated entities acquired in acquisitions,
equipment operating leases for items such as additional taxes being assessed due to a change in tax law and
certain other agreements. We estimate our exposure to these matters to be less than $50 million. As of
September 30, 2021 and 2020, we had recorded $2.3 million and $9.6 million, respectively, for the estimated fair
value of these guarantees. The decline in fiscal 2021 was due to the expiration of certain 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.
indemnifications of
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 and 2020, the
Supreme Court of Brazil rendered favorable decisions on eight of our cases granting us the right to recover certain
state value added tax. The tax authorities in Brazil filed a Motion of Clarification with the Supreme Court of Brazil.
Based on our 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 recorded the
estimated recoveries across several periods beginning in the fourth quarter of fiscal 2019 as we reviewed the
documents and the amount became estimable. In May 2021, the Supreme Court of Brazil judged the Motion of
Clarification and concluded on the gross methodology, which was consistent with our evaluation and that of our tax
and legal advisors. In fiscal 2021, we recorded a receivable for our expected recovery and interest that consisted
primarily of a $0.6 million reduction of Cost of goods sold and $0.3 million reduction of Interest expense, net. 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
115
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 18. Accumulated Other Comprehensive Loss and Other Comprehensive Income (Loss)
The following table summarizes the changes in accumulated other comprehensive loss by component for the
fiscal years ended September 30, 2021 and 2020 (in millions):
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
Other comprehensive (loss) income before
reclassifications
Amounts reclassified from accumulated
other comprehensive loss
Net current period other comprehensive income
Balance at September 30, 2021
Deferred
(Loss) Income
on Cash
Flow Hedges
Defined Benefit
Pension and
Postretirement
Plans
Foreign
Currency
Items
Total (1)
$
0.7
$
(698.0) $
(371.9) $ (1,069.2)
(9.9)
3.6
(6.3)
(5.6) $
5.1
38.6
(214.7)
(219.5)
42.2
43.7
(73.4)
(727.7) $
(214.7)
(177.3)
(73.4)
(586.6) $ (1,319.9)
(0.1)
161.7
124.2
285.8
5.5
5.4
(0.2) $
29.5
191.2
(536.5) $
124.2
(462.4) $
35.0
320.8
(999.1)
$
$
(1) All amounts are net of tax and noncontrolling interest.
The following table summarizes the reclassifications out of accumulated other comprehensive loss by
component for the fiscal years ended September 30, 2021 and 2020 (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 (4)
Natural gas commodity hedge loss (5)
Subtotal derivative instruments
Years Ended September 30,
2021
2020
Pre-Tax
Tax
Net of
Tax
Pre-Tax
Tax
Net of
Tax
$
(33.3) $
(6.0)
(39.3)
8.3 $
1.5
9.8
(25.0) $
(4.5)
(29.5)
(47.7) $
(5.0)
(52.7)
12.8 $
1.3
73.4
87.5
(34.9)
(3.7)
73.4
34.8
(7.4)
(7.4)
1.9
1.9
(5.5)
(5.5)
(2.3)
(2.6)
(4.9)
0.6
0.7
1.3
(1.7)
(1.9)
(3.6)
Total reclassifications for the period
$
(46.7) $
11.7 $
(35.0) $
(57.6) $
88.8 $
31.2
(1) Amounts in parentheses indicate charges to earnings. Amounts pertaining to noncontrolling interests are excluded.
(2) These accumulated other comprehensive income components are included in the computation of net periodic pension
cost. See “Note 5. Retirement Plans” for additional information.
116
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(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 income (loss), including noncontrolling interest, for the
years ended September 30, 2021, 2020 and 2019, is as follows (in millions):
Fiscal 2021
Foreign currency translation gain
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 income
Less: Other comprehensive income attributable to noncontrolling
interests
Other comprehensive income attributable to common
stockholders
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
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
Pre-Tax
Tax
Net of Tax
$
$
124.3
(0.1)
$
7.4
222.2
33.9
(5.6)
6.0
388.1
(0.3)
(1.9)
(56.6)
(8.4)
1.4
(1.5)
(67.0)
124.3
(0.1)
5.5
165.6
25.5
(4.2)
4.5
321.1
(0.3)
$
$
$
$
387.8
$
(67.0) $
320.8
Pre-Tax
Tax
Net of Tax
(215.0) $
(13.3)
$
3.3
4.9
34.6
48.3
(26.9)
5.1
(162.3)
0.3
(1.3)
(10.4)
(12.9)
7.3
(1.3)
(15.3)
(215.0)
(10.0)
3.6
24.2
35.4
(19.6)
3.8
(177.6)
0.3
(162.0) $
(15.3) $
(177.3)
Pre-Tax
Tax
Net of Tax
(143.4) $
1.5
$
(0.4)
(0.3)
(335.9)
23.3
(3.9)
2.4
(456.3)
1.5
0.1
87.4
(6.1)
0.6
(0.6)
81.0
(0.1)
(143.4)
1.1
(0.2)
(248.5)
17.2
(3.3)
1.8
(375.3)
1.4
$
(454.8) $
80.9
$
(373.9)
117
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 19. 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 2021, we repurchased approximately 2.5 million shares of our Common Stock for an aggregate cost of
$125.1 million (a portion of which settled after September 30, 2021). 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, 2021, we had approximately 16.6 million shares of Common
Stock available for repurchase under the program.
Note 20. Share-Based Compensation
Share-based Compensation Plans
At our Annual Meeting of Stockholders held on January 29, 2021, our stockholders approved the WestRock
Company 2020 Incentive Stock Plan. The 2020 Incentive Stock Plan allows for the granting of 4.95 million shares
of options, restricted stock, SARs and restricted stock units to certain key employees and directors. As
of September 30, 2021, there were 3.1 million shares available to be granted under this plan. 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, 2021, there were 1.5 million shares available to be granted
under this plan. In addition, there were 12.2 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, 2021, 2020 and 2019 include share-based
compensation expense of $88.6 million, $130.3 million and $64.2 million, respectively. The increase in fiscal 2020,
and subsequent decline, was due to shares of restricted stock granted in fiscal 2020 to satisfy certain annual
bonus incentives in connection with the WestRock Pandemic Action Plan. The total income tax benefit in the
results of operations in connection with share-based compensation was $22.3 million, $33.2 million and $16.3
million, for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
Cash received from share-based payment arrangements for the fiscal years ended September 30, 2021, 2020
and 2019 was $57.5 million, $32.4 million and $61.5 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
terms utilizing an approximately 0.83 conversion factor as described in the Merger
awards with identical
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.
118
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 2021, 2020 and 2019.
The table below summarizes the changes in all stock options during the fiscal year ended September 30,
2021:
Outstanding at September 30, 2020
Exercised
Expired
Outstanding at September 30, 2021
Exercisable at September 30, 2021
Weighted
Average
Exercise
Price
35.26
30.58
52.43
38.79
38.79
Stock
Options
3,456,297 $
(1,563,086)
(47,539)
1,845,672 $
1,845,672 $
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
(in millions)
2.2 $
2.2 $
23.4
23.4
The aggregate intrinsic value of options exercised during the years ended September 30, 2021, 2020 and
2019 was $29.1 million, $11.8 million and $44.5 million, respectively.
As of September 30, 2021, there was no remaining unrecognized compensation cost related to nonvested
stock options.
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 aggregate intrinsic value of SARs exercised during
the years ended September 30, 2021, 2020 and 2019 was $0.2 million, $0.2 and zero million, respectively, and the
number of SARs outstanding at September 30, 2021 was de minimis.
119
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
in three years. Presently, other than
terms of
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. As mentioned above, 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 individual grant. The employee grants generally vest
The table below summarizes the changes in restricted stock during the fiscal year ended September 30, 2021:
Outstanding at September 30, 2020 (1)
Granted
Vested and released
Forfeited
Outstanding at September 30, 2021 (1)
Weighted
Average
Grant Date Fair
Value
Shares/Units
6,615,367
2,104,393
(3,194,223)
(548,078)
4,977,459
$
$
38.36
44.17
32.87
59.51
42.02
(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 that would result in the issuance of approximately 0.2 million additional shares.
However, it is possible that the performance attained may vary.
There was approximately $94.5 million of unrecognized compensation cost related to all nonvested restricted
shares as of September 30, 2021 that will be recognized over a weighted average remaining vesting period of 1.5
years.
120
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table represents a summary of restricted stock shares granted in fiscal 2021, 2020 and 2019 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
2021
42,482
2020
49,236
2019
39,792
1,149,592
Share performance condition at target (3)
798,490
869,065
652,465
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 (5)
Share of restricted stock assumed in purchase accounting:
Shares granted with a service condition (6)
Total restricted stock granted
127,050
1,009,387
126,984
152,595
889,030
2,486,249
407,300
682,264
2,104,393
4,446,175
742,032
3,673,445
(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 2021 for the fiscal 2018 Cash Flow Per Share were at 89.3% of target, therefore, the
remainder of the grant was forfeited. 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.
(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
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) Shares issued in fiscal 2021 for the fiscal 2020 restricted stock granted for annual bonus were at 105% of target.
(6) These shares vest over approximately one to three years.
The employee grants with a relative Total Shareholder Return market condition in fiscal 2021 were valued
using a Monte Carlo simulation at $53.69 per share. The significant assumptions used in valuing these grants
included: an expected term of 3.0 years, an expected volatility of 46.2% and a risk-free interest rate of 0.2%. In
addition, we had a subsequent grant for an individual valued using a Monte Carlo simulation at $70.80 per share,
using an expected term of 2.9 years, an expected volatility of 47.0% and a risk free rate of 0.3%. 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 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.
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.
121
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table represents a summary of restricted stock vested and released in fiscal 2021, 2020 and
2019 (in millions, except shares):
Shares of restricted stock vested and released
Aggregate fair value of restricted stock vested and released
2021
3,194,223
125.1
$
$
2020
766,431
29.6
2019
2,933,556
115.2
$
The shares vested and released in fiscal 2021 reflect the vesting of the fiscal 2020 grants for annual bonus that
vested at 105% of target and the fiscal 2018 grants, with a Cash Flow Per Share performance condition that vested
at 89.3% of target, as well as certain shares with a service condition. The shares vested and released 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 and released 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.
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 2021, 2020 and 2019, employees purchased approximately 0.3 million, 0.4
million and 0.4 million shares, respectively, under the ESPP. We recognized $1.9 million, $2.1 million and $1.2
million of expense for fiscal 2021, 2020 and 2019, respectively, related to the 15% discount on the purchase price
allowed to employees. As of September 30, 2021, adjusted for the spinoff of our Specialty Chemicals business in
2016, approximately 1.3 million shares of Common Stock remained available for purchase under the ESPP.
Note 21. 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):
Numerator:
Net income (loss) attributable to common stockholders
Less: Distributed and undistributed income available to
participating securities
Distributed and undistributed income (loss) available to
common stockholders
Denominator:
Basic weighted average shares outstanding
Effect of dilutive stock options and non-participating securities
Diluted weighted average shares outstanding
Basic earnings (loss) per share attributable to common
stockholders
Diluted earnings (loss) per share attributable to common
stockholders
$
$
$
$
2021
September 30,
2020
2019
838.3
$
(690.9) $
862.9
(0.2)
(0.1)
(0.1)
838.1
$
(691.0) $
862.8
265.2
2.3
267.5
259.2
259.2
256.6
2.5
259.1
3.16
$
(2.67) $
3.36
3.13
$
(2.67) $
3.33
122
WESTROCK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Options and restricted stock in the amount of 0.5 million, 4.2 million and 1.3 million common shares in fiscal
2021, 2020 and 2019, 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.
123
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 and subsidiaries (the
Company) as of September 30, 2021 and 2020, the related consolidated statements of operations, comprehensive
income (loss), equity and cash flows for each of the three years in the period ended September 30, 2021, 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,
2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended
September 30, 2021, 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, 2021, 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 19, 2021
expressed an unqualified opinion thereon.
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.
Goodwill Impairment Assessment of the Consumer Packaging Reporting Unit
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. The Company estimates the fair value
based on a combination of the discounted cash flow method and guideline company method. As
of September 30, 2021, the Company’s goodwill balance was $5,959.2 million, of which $2,295.9
million related to the Consumer Packaging reporting unit.
Auditing management’s goodwill impairment tests involved especially subjective judgements due
124
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, EBITDA multiples 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 value of the reporting unit, including the Company’s
controls over the valuation model,
the valuation model and
development of underlying assumptions used to estimate such fair value of the reporting unit. 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.
the mathematical accuracy of
To test the estimated fair value of the Company’s reporting unit, our audit procedures included,
among others, assessing the valuation methodology, determination of
the guideline public
companies, 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
factors. We assessed the historical accuracy of management’s
model and other relevant
assumptions of future expected net cash flows and performed sensitivity analyses of significant
assumptions to evaluate the changes in the fair value of the reporting unit 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 value of the reporting unit. 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 $199.5 million related to its uncertain tax positions at September 30, 2021.
The Company uses significant judgement in (1) determining whether a tax position, based solely
on its technical merits, is more likely than not to be sustained upon examination, and (2) in
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 application of the
two-step recognition and measurement principles, including management’s review of the inputs
and resulting calculations of unrecognized income tax benefits.
To test the Company’s measurement and recording of its uncertain tax positions, our audit
procedures included, among others, inspecting the Company’s analysis and related tax opinions
to evaluate the assumptions the Company used to develop its uncertain tax positions and related
unrecognized income tax benefit amounts by jurisdiction. We also tested the completeness and
accuracy of the underlying data used by the Company to calculate its uncertain tax positions. For
example, we compared the 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.
125
/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 19, 2021
126
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 and subsidiaries’
reporting as of
September 30, 2021, 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, 2021, based on the COSO criteria.
internal control over
financial
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2021 and 2020,
and the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for
each of the three years in the period ended September 30, 2021, and the related notes and our report dated
November 19, 2021, 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.
its inherent
reporting may not prevent or detect
Because of
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.
internal control over
limitations,
financial
127
/s/ Ernst & Young LLP
Atlanta, Georgia
November 19, 2021
128
WESTROCK COMPANY
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Managements 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.
limitations,
its inherent
Because of
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,
2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework (2013 framework).
The scope of our efforts to comply with Section 404 of the Sarbanes-Oxley Act with respect to fiscal 2021 included
all of our operations. Based on our assessment, management believes that we maintained effective internal control
over financial reporting as of September 30, 2021. 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
in
The Audit Committee of our board of directors, composed solely of directors who are independent
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
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 2022 annual
meeting of stockholders and is incorporated herein by reference.
internal auditor without management present
to ensure that
DAVID B. SEWELL,
Chief Executive Officer and President
ALEXANDER W. PEASE,
Executive Vice President and Chief Financial Officer
November 19, 2021
129
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, 2021, 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, 2021, 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, 2021. 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.
130
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 18, 2021,
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 18, 2021. The foregoing certification was unqualified.
Item 9B. OTHER INFORMATION
Not applicable.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
131
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 12, 2021:
Name
David B. Sewell
Alexander W. Pease
Peter C. Durette
Patrick M. Kivits
Patrick E. Lindner
John L. O’Neal
Thomas M. Stigers
Vicki L. Lostetter
Julia A. McConnell
Robert B. McIntosh
Age
53
50
48
54
52
56
58
62
52
64
Position Held
Chief Executive Officer and President
Executive Vice President and Chief Financial Officer
President, Corrugated Packaging
President, Consumer Packaging
President, Commercial, Innovation and Sustainability
President, Global Paper
President, Mill Operations
Chief Human Resources Officer
Senior Vice President and Chief Accounting Officer
Executive Vice President, General Counsel and Secretary
David B. Sewell has served as WestRock’s chief executive officer and president since March 15, 2021. He
previously served as president and chief operating officer of The Sherwin-Williams Company, where he was
responsible for all operating segments for the $18 billion global coatings company, since March 2019. From August
2014 to March 2019, he served as president of the company’s performance coatings group. Prior to joining the
company in February 2007, Mr. Sewell spent 15 years working for General Electric Company.
Alexander W. Pease has served as WestRock’s executive vice president and chief financial officer since
November 8, 2021. He served as executive vice president and chief financial officer of CommScope Holding
Company, Inc., an $8 billion global provider of infrastructure solutions for communication and entertainment
networks, since 2018. From 2016 to 2018, he served as executive vice president and chief financial officer of
Snyder’s-Lance, Inc. He served as a principal at McKinsey & Company as a leader in its global corporate finance
and business functions practice from 2015 to 2016. From 2011 to 2015, he was senior vice president and chief
financial officer of EnPro Industries, Inc. Before joining EnPro, he worked at McKinsey & Company and served in
the U.S. Navy as a SEAL Platoon commander.
Peter C. Durette has served as WestRock’s president, Corrugated Packaging since June 2, 2021. He had
previously served as the Company’s executive vice president, corrugated container and chief strategy officer. Mr.
Durette served as chief strategy officer of MeadWestvaco Corporation since 2009 and had retained this role with
the Company since its formation in 2015 upon the combination of MeadWestvaco and Rock-Tenn Company.
During his time with the Company and MeadWestvaco, Mr. Durette has held various other commercial and
operating roles, including president of enterprise solutions, executive vice president of beverage packaging and
senior vice president of home health and beauty. Prior to joining MeadWestvaco, he spent more than a decade
with Marakon Associates, a boutique strategic advisory company.
Patrick M. Kivits has served as WestRock’s president, Consumer Packaging since June 2, 2021. He had
previously served as the Company’s president, Multi Packaging Solutions since August 2020 and, prior to that, as
executive vice president operations North America for Multi Packaging Solutions since November 2019. Prior to
joining the Company, Mr. Kivits spent 20 years in the specialty chemical industry, working for H.B. Fuller and
Henkel in adhesives for the packaging industry.
Patrick E. Lindner has served as WestRock’s president, commercial, innovation and sustainability since June
2, 2021. He had previously served as the Company’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.
132
John L. O’Neal has served as the Company’s president, global paper since June 2, 2021. He had previously
served as the Company’s executive vice president, global food and beverage since 2016. From 2012 to 2016, he
served in senior leadership roles in the Company’s corrugated packaging and paper solution businesses. Prior to
joining the Company, Mr. O’Neal spent 16 years working for Mirant Corporation.
Thomas M. Stigers has served as the Company’s president, mill operations since June 2, 2021. He had
previously served as the Company’s executive vice president, containerboard mills. Mr. Stigers joined the
Company in connection with its acquisition of Southern Container Corp in 2008, where he served as vice president
of Solvay Paperboard. Mr. Stigers has worked in the paper industry since 1987 in various operational leadership
roles with Champion International, Simpson Paper Company, Donohue Inc., and Abitibi-Consolidated Inc.
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
Inc., The Coca-Cola Company and
roles within the human resources function with Coca-Cola Enterprises,
Honeywell, Inc.
Julia A. McConnell has served as WestRock’s senior vice president and 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 finance from 2018 to May 2020 and as vice president, finance and corporate controller
from 2010 to 2019. Prior to joining Carter’s, Ms. McConnell served in various roles, including as assistant
controller, for PepsiCo, Inc. from 2004 to 2010.
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.
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 2022 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 2022 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 2022 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 2022 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 2022 annual meeting of stockholders and is incorporated herein by reference.
133
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 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income (Loss) for the years ended September 2021,
2020 and 2019
Consolidated Balance Sheets as of September 30, 2021 and 2020
Consolidated Statements of Equity for the years ended September 30, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended September 30, 2021, 2020 and 2019
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
60
61
62
63
64
65
124
127
129
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.
134
Exhibit
Number
2.1
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)
4.1(h)
INDEX TO EXHIBITS
Description of Exhibits
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 for the year ended September 30, 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).
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).
Seventh Supplemental Indenture, dated as of July 1, 2015, to the Indenture dated as of July 15,
1982, between WestRock MWV, LLC (formerly MeadWestvaco Corporation) and Deutsche Bank
Trust Company Americas, as Trustee (incorporated by reference to Exhibit 4.3 of WestRock’s
Current Report on Form 8-K filed on July 2, 2015).
Eighth Supplemental Indenture, dated as of November 2, 2018, to the Indenture dated as of July 15,
1982, between MWV and Deutsche Bank Trust Company Americas, as Trustee (incorporated by
reference to Exhibit 4.3 of WestRock’s Current Report on Form 8-K filed on November 5, 2018).
P 4.2(a)
Form of Indenture, dated as of March 1, 1983, between Westvaco Corporation and The Bank of New
135
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)
4.4(b)
4.4(c)
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).
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).
136
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)
4.7(b)
4.7(c)
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).
Indenture, dated as of November 7, 2013,
First Supplemental
to the Indenture dated as of
September 11, 2012, by and among Rock-Tenn Company, the Guarantors (as defined therein) and
The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit
4.7(c) of WestRock’s Annual Report on Form 10-K for the year ended September 30, 2015).
Second Supplemental Indenture, dated as of February 21, 2014, to the Indenture dated as of
September 11, 2012, by and among Rock-Tenn Company, the Guarantors (as defined therein) and
The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit
4.7(d) of WestRock’s Annual Report on Form 10-K for the year ended September 30, 2015).
Third Supplemental Indenture, dated as of July 1, 2015, to the Indenture dated as of September 11,
2012, by and among Rock-Tenn Company, the Guarantors (as defined therein) and The Bank of
New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 of
WestRock’s Current Report on Form 8-K filed on July 2, 2015).
Fourth Supplemental Indenture, dated as of November 2, 2018, to the Indenture dated as of
September 11, 2012, by and among RKT, the guarantors party thereto and The Bank of New York
Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 of WestRock’s
Current Report on Form 8-K filed on November 5, 2018).
Indenture, dated August 24, 2017, by and among WestRock Company, WestRock MWV LLC,
WestRock RKT Company and The Bank of New York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.1 of WestRock’s Current Report on Form 8-K filed on August
24, 2017).
First Supplemental Indenture, dated August 24, 2017, 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).
137
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)
*10.2(b)
*10.3
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).
to The Mead Corporation 1996 Stock Option Plan, effective January 23, 2007
Amendment
(incorporated by reference to Exhibit 10.4 of MWV’s Annual Report on Form 10-K for the year ended
December 31, 2007).
WestRock Company Second Amended and Restated Annual Executive Bonus Plan (incorporated by
reference to pages A-1 to A-3 of WestRock’s Definitive Proxy Statement for the 2018 Annual
Meeting of Shareholders filed with the SEC on December 19, 2017).
WestRock Company Third Amended and Restated Annual Executive Bonus Plan, dated January 31,
2019 (incorporated by reference to Exhibit 10.1 of WestRock’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2019).
Rock-Tenn Company Supplemental Retirement Savings Plan, effective as of May 15, 2003
(incorporated by reference to Exhibit 4.1 of RockTenn’s Registration Statement on Form S-8 filed on
April 30, 2003, File No. 333-104870).
*10.4(a)
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).
*10.4(b)
Amendment Number 1 to Rock-Tenn Company 2004 Incentive Stock Plan (incorporated by
138
*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
*10.9
*10.10
*10.11
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).
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,
139
*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)
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
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).
10.24(b)
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
140
10.25(a)
10.25(b)
10.25(c)
10.26(a)
10.26(b)
10.26(c)
10.26(d)
10.26(e)
10.26(f)
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).
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).
Amendment No. 3, dated as of March 12, 2021, 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 10.2 of WestRock’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2021).
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).
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).
10.27
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
141
10.28
10.29
@10.30
10.31(a)
10.31(b)
10.31(c)
10.32(a)
10.32(b)
10.32(c)
10.32(d)
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 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 year ended
September 30, 2016).
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).
Credit Agreement, dated as of February 26, 2021, by and among WRKCo Inc., as Parent, Westrock
Company, WRK Luxembourg S.à r.l., WRK International Holdings S.à r.l., Multi Packaging Solutions
Limited, WestRock Packaging Systems Germany GmbH and certain additional subsidiaries of
WestRock Company from time to time party hereto, 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., Bank of America Europe Designated Activity Company, The Bank of
Nova Scotia, and ING Bank N.V., Dublin Branch, 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 ending March 31, 2021).
10.33
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).
142
*10.34
*10.35
*10.36
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).
*10.37(a) 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).
*10.37(b)
*10.38
Amendment No. 1 to WestRock Company Executive Severance Plan, dated April 22, 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).
*10.39
WestRock Company 2020 Incentive Stock Plan (incorporated by reference to Exhibit 10.44 of
WestRock's Annual Report on Form 10-K for the year ended September 30, 2020).
21
22
23
31.1
31.2
#32.1
Subsidiaries of the Registrant.
List of Guarantor Subsidiaries and Issuers of Guaranteed Securities (incorporated by reference to
Exhibit 22 of WestRock’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2020).
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 David B. Sewell, 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 Alexander W. Pease, 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 David B. Sewell, Chief Executive Officer and President of
WestRock Company, and by Alexander W. Pease, 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.
143
@ 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.
144
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.
SIGNATURES
Dated: November 19, 2021
WESTROCK COMPANY
By:
/s/ DAVID B. SEWELL
David B. Sewell
Chief Executive Officer and President
145
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/ DAVID B. SEWELL
David B. Sewell
Chief Executive Officer and President
(Principal Executive Officer), Director
Date
November 19, 2021
/s/ ALEXANDER W. PEASE Executive Vice President and Chief Financial Officer
November 19, 2021
Alexander W. Pease
(Principal Financial Officer)
/s/ JULIA A. MCCONNELL
Julia A. McConnell
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
November 19, 2021
/s/ JOHN A. LUKE, JR.
John A. Luke, Jr.
Director, Non-Executive Chairman of the Board
November 19, 2021
/s/ COLLEEN F. ARNOLD
Colleen F. Arnold
Director
/s/ TIMOTHY J. BERNLOHR Director
Timothy J. Bernlohr
/s/ J. POWELL BROWN
J. Powell Brown
/s/ TERRELL K. CREWS
Terrell K. Crews
Director
Director
/s/ RUSSELL M. CURREY
Russell M. Currey
Director
/s/ SUZAN F. HARRISON
Suzan F. Harrison
Director
/s/ GRACIA C. MARTORE
Gracia C. Martore
Director
/s/ JAMES E. NEVELS
James E. Nevels
/s/ BETTINA M. WHYTE
Bettina M. Whyte
/s/ ALAN D. WILSON
Alan D. Wilson
Director
Director
Director
November 19, 2021
November 19, 2021
November 19, 2021
November 19, 2021
November 19, 2021
November 19, 2021
November 19, 2021
November 19, 2021
November 19, 2021
November 19, 2021
146
CERTIFICATION ACCOMPANYING PERIODIC REPORT
PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, David B. Sewell, 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 19, 2021
/s/ David B. Sewell
David B. Sewell
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, Alexander W. Pease, 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 19, 2021
/s/ Alexander W. Pease
Alexander W. Pease
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 2021 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
$
2,279.9
$
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
2021
Fiscal
2020
Fiscal
2019
Fiscal
2018
Fiscal
2017
Fiscal
2016
Plus: Cash Restructuring and other costs, net of
income tax benefit of $9.1, $19.4, $29.9, $14.5,
$36.4 and $70.4
Adjusted Operating Cash Flow
Less: Capital expenditures
Adjusted Free Cash Flow
Adjusted Segment EBITDA
28.2
2,308.1
(815.5)
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)
$
1,492.6
$
1,152.4
$
1,043.8
$
1,462.3
$
1,221.4
$
1,031.0
WestRock uses “Adjusted Segment EBITDA”, along with other factors, to evaluate our segment performance
against our peers. Management believes this measure provides 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 income attributable to
common stockholders”.
A - 1
Set forth below are reconciliations of “Segment EBITDA” and “Adjusted Segment EBITDA” to the most directly
comparable GAAP measure “Net income attributable to common stockholders” (in millions):
Net income attributable to common stockholders
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
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
Fiscal 2021
$
838.3
4.2
243.4
(10.9)
9.7
372.3
31.5
(2.9)
(0.9)
89.4
1,574.1
(89.4)
1,460.0
2,944.7
54.5
2,999.2
$
(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.
Adjusted Net Debt
WestRock uses the non-GAAP financial measure “Adjusted Net Debt”. Management believes this measure
provides WestRock’s board of directors, investors, potential investors, securities analysts and others with useful
information to evaluate WestRock’s repayment of debt relative to other periods because it includes or excludes
certain items management believes are not comparable from period to period. We believe “Adjusted Net Debt”
provides greater comparability across periods by adjusting for cash and cash equivalents, as well as fair value of
debt step-up included in Total Debt that is not subject to debt repayment. WestRock believes that the most directly
comparable GAAP measure is “Total Debt” which is derived from the current portion of debt and long-term debt
due after one year. Set forth below is a reconciliation of “Adjusted Net Debt” to “Total Debt” for the periods
indicated (in millions):
Current portion of debt
Long-term debt due after one year
Total debt
Less: Cash and cash equivalents
Less: Fair value of debt step-up
Adjusted Net Debt
Sep. 30,
2021
$
$
$
168.8
8,025.3
8,194.1
(290.9)
(192.4)
7,710.8
Sep. 30,
2020
$
$
$
222.9
9,207.7
9,430.6
(251.1)
(208.9)
8,970.6
Total debt reduction - fiscal 2021
$
1,236.5
Adjusted Net Debt reduction - fiscal 2021
$
1,259.8
A - 2
Forward-looking Guidance
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 2021 that were included in our annual report on Form
10-K, this 2021 Annual Report includes additional forward-looking statements that were not included in our annual
report on Form 10-K (e.g., that our broad portfolio of packaging solutions provides us with greater opportunity and
flexibility to focus on growing markets where customers value our differentiation; that we are more resilient because
of our broad mix of products and customers; that we will continue to realize increasing benefits from our
investments at our mills in Florence, South Carolina, and Tres Barras, Brazil in fiscal 2022 and beyond; we are
investing in innovative materials science and design capabilities to ensure we remain on the forefront in addressing
this sustainable packaging demand; we are well positioned for record performance; we have strong demand and
great opportunities to grow our company and improve our results while providing value to our customers and
shareholders; as we report our results in the future in four new segments, Corrugated Packaging, Consumer
Packaging, Paper and Distribution, it will provide greater clarity into the performance of each area; we are making
the investments needed to lead in sustainability and accelerate our innovation platform; we remain disciplined in
our capital allocation strategy and will look to use our strong cash flow to create shareholder value; and the future
is bright at WestRock).
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
[This Page Intentionally Left Blank]
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 3, 2021, there were
approximately 6,136 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
computershare.com
ANNUAL MEETING
The annual meeting of
stockholders will be held online at
virtualshareholdermeeting.com/
WRK2022 at 9 a.m., Eastern Standard
Time, Friday, January 28, 2022. 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, 2016, in WestRock Company’s
Common Stock (assuming the reinvestment of dividends) through September 30, 2021, 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. ©2021 Standard & Poor’s, a division of The McGraw-Hill Companies Inc. All rights reserved.
Comparison of 5-Year Cumulative Total Return2
$250
$200
$150
$100
$50
WestRock Co.
S&P 500
New Peer Group
Old Peer Group
09/2016
$100
$100
$100
$100
09/2017
$120.56
$118.61
$118.55
$118.83
09/2018
$116.90
$139.85
$126.97
$127.25
09/2019
$83.55
$145.80
$127.18
$127.40
09/2020
$82.66
$167.89
$134.98
$134.72
09/2021
$120.75
$218.26
$173.37
$173.91
1 Old Peer Group includes: 3M Company, Avery Dennison Corporation, Ball Corporation, Crown Holdings, Inc., Freeport McMoRan Inc., The Goodyear Tire & Rubber Company,
Honeywell International, Inc., International Paper Company, Kimberly-Clark Corporation, LyondellBasell Industries N.V., Nucor Corporation, Packaging Corporation of America, PPG
Industries Inc., Sherwin-Williams Company, United States Steel Corporation and Weyerhaeuser Company. New Peer Group reflects the addition of Amcor plc. The Compensation
Committee included Amcor plc based on its industry relevance to us, to account for changes in the competitive market for talent and to expand our peer group sample size.
2 $100 invested on Sept. 30, 2016, in stock or index, including reinvestment of dividends. Fiscal year ending September 30.
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A N NUA L REP OR T
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