WestRock Reports Fiscal 2021 Fourth Quarter Results: Record Net Sales of $5.1 Billion Up 14%

ATLANTA–(BUSINESS WIRE)–WestRock Company (NYSE:WRK), a leading provider of differentiated, sustainable paper and packaging solutions, today announced results for its fiscal fourth quarter and year ended September 30, 2021.

Notable items in the fourth quarter include:

• Record net sales of $5.1 billion increased 14% compared to $4.5 billion in the prior year quarter
• Net income of $324 million compared to a net loss of $1,156 million in the prior year quarter, which included a $1,314 million goodwill impairment net of tax
• Adjusted Segment EBITDA of $878 million increased 22% compared to $721 million in the prior year quarter
• Earned $1.20 per diluted share and $1.23 of Adjusted Earnings Per Diluted Share compared to a loss of $4.45 and adjusted earnings of $0.73, respectively, in the prior year quarter

Full Year 2021 Highlights:

• Record net sales of $18.7 billion increased 7% compared to $17.6 billion in the prior year
• Net income of $838 million compared to a net loss of $691 million in the prior year
• Adjusted Segment EBITDA of $3.0 billion increased 7% compared to $2.8 billion in the prior year
• Earned $3.13 per diluted share and $3.39 of Adjusted Earnings Per Diluted Share compared to a loss of $2.67 and adjusted earnings of $2.75, respectively, in the prior year
• Generated net cash provided by operating activities of $2.28 billion and record Adjusted Free Cash Flow of $1.49 billion; ended the year with a net leverage ratio of 2.38x

“The WestRock team delivered strong results in fiscal 2021, with record net sales and strong cash flows for the full fiscal year,” said David B. Sewell, chief executive officer. “We executed on our capital allocation priorities, and I’m pleased to announce that we reached our target net leverage ratio in the quarter. In addition, we recently announced another increase to our dividend, which will result in a 25% increase since February. Looking forward, we believe we remain well positioned to successfully partner with our customers to meet their growing needs for sustainable, fiber-based packaging solutions.”

Consolidated Financial Results

WestRock’s performance for the three months ended September 30, 2021 and 2020 (in millions):

		Three Months Ended
		Sep. 30, 2021				Sep. 30, 2020				Change
Net sales		$	5,090.5			$	4,471.5			$	619.0
Segment income		$	526.4			$	373.3			$	153.1
Non-allocated expenses			(3.8	)			(16.6	)			12.8
Depreciation			269.4				258.9				10.5
Amortization			95.7				106.7				(11.0	)
Segment EBITDA			887.7				722.3				165.4
Adjustments (1)			(9.8	)			(1.6	)			(8.2	)
Adjusted Segment EBITDA		$	877.9			$	720.7			$	157.2
(1) See the Adjusted Net Income tables on page 11 for adjustments

Operating Highlights for the Three Months Ended September 30, 2021 compared to September 30, 2020:

Net sales increased $619 million compared to the prior year quarter. Corrugated Packaging segment net sales increased $500 million and Consumer Packaging segment net sales increased $156 million. Segment income increased $153 million compared to the prior year quarter, with Corrugated Packaging segment income increasing $93 million and Consumer Packaging segment income increasing $60 million.

Additional information about the changes in segment net sales and income is included below.

Restructuring and Other Items

Restructuring and other items during the fourth quarter of fiscal 2021 was $12 million, primarily related to plant closure activities, including items such as impairment costs and certain lease terminations.

Net Cash Provided By Operating Activities and Other Financing and Investing Activities

Net cash provided by operating activities was $678 million in the fourth quarter of fiscal 2021 compared to $732 million in the prior year quarter. Total debt was $8.2 billion at September 30, 2021, or $8.0 billion excluding $192 million of unamortized fair market value step-up of debt acquired in mergers and acquisitions, and $7.7 billion after further excluding cash and cash equivalents of $291 million. During the fourth quarter of fiscal 2021, total debt declined by $479 million and Adjusted Net Debt declined by $215 million. The Company had approximately $3.7 billion of available liquidity under long-term committed credit facilities and cash and cash equivalents at September 30, 2021. During the fourth quarter of fiscal 2021, WestRock invested $310 million in capital expenditures, returned $122 million to stockholders through stock repurchases and paid $64 million in dividends to stockholders.

Segment Results

WestRock’s segment performance for the three months ended September 30, 2021 and 2020 (in millions):

Corrugated Packaging Segment

		Three Months Ended
		Sep. 30, 2021				Sep. 30, 2020				Change
Segment net sales		$	3,398.7			$	2,898.4			$	500.3
Segment income		$	374.8			$	281.9			$	92.9
Depreciation			185.8				177.2				8.6
Amortization			45.8				57.2				(11.4	)
Segment EBITDA			606.4				516.3				90.1
Adjustments (1)			(0.1	)			(2.9	)			2.8
Adjusted Segment EBITDA		$	606.3			$	513.4			$	92.9
(1) See the Adjusted Net Income tables on page 11 for adjustments

Operating Highlights for the Three Months Ended September 30, 2021 compared to September 30, 2020:

Segment net sales increased $500 million, primarily due to higher selling price/mix, higher volumes and favorable impact of foreign currency. The Corrugated Packaging segment delivered a Segment EBITDA margin of 17.8% and a North American Adjusted Segment EBITDA margin of 19.0%.

Segment income increased $93 million, primarily due to the margin impact of higher selling price/mix and higher volumes that were partially offset by net cost inflation and other items.

Consumer Packaging Segment

		Three Months Ended
		Sep. 30, 2021			Sep. 30, 2020			Change
Segment net sales		$	1,783.0		$	1,627.2		$	155.8
Segment income		$	151.6		$	91.4		$	60.2
Depreciation			81.9			80.3			1.6
Amortization			49.9			49.5			0.4
Segment EBITDA			283.4			221.2			62.2
Adjustments (1)			0.5			1.3			(0.8	)
Adjusted Segment EBITDA		$	283.9		$	222.5		$	61.4
(1) See Adjusted Net Income tables on page 11 for adjustments

Operating Highlights for the Three Months Ended September 30, 2021 compared to September 30, 2020:

Segment net sales increased $156 million, primarily due to higher selling price/mix, higher volumes and favorable impact of foreign currency. The Consumer Packaging segment delivered Segment EBITDA and Adjusted Segment EBITDA margins of 15.9%.

Segment income increased $60 million, primarily due to the margin impact from higher selling price/mix, productivity improvements, lower economic downtime compared to the prior year period and higher volumes that were partially offset by net cost inflation and other items.

Conference Call

WestRock will host a conference call to discuss its results of operations for the fiscal fourth quarter ended September 30, 2021 and other topics that may be raised during the discussion at 8:30 a.m., Eastern Time, on Tuesday, November 9, 2021. The conference call, which will be webcast live, an accompanying slide presentation, and this release can be accessed at ir.westrock.com.

Investors who wish to participate in the webcast via teleconference should dial 888-330-2022 (inside the U.S.) or +1 646-960-0690 (outside the U.S.) at least 15 minutes prior to the start of the call and enter the passcode 8741412. Replays of the call can be accessed at ir.westrock.com.

About WestRock

WestRock (NYSE:WRK) partners with our customers to provide differentiated, sustainable paper and packaging solutions that help them win in the marketplace. WestRock’s team members support customers around the world from locations spanning North America, South America, Europe, Asia and Australia. Learn more at www.westrock.com.

Cautionary Statements

This release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on our current expectations, beliefs, plans or forecasts and are typically identified by words or phrases such as “may,” “will,” “could,” “should,” “would,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “prospects,” “potential” and “forecast,” and other words, terms and phrases of similar meaning. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. The Company cautions readers that a forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. Such forward-looking statements include, but are not limited to, that we believe we remain well positioned to successfully partner with our customers to meet their growing needs for sustainable, fiber-based packaging solutions. With respect to these statements, the Company has made assumptions regarding, among other things, developments related to the COVID-19 pandemic, including the severity, magnitude and duration of the pandemic, negative global economic conditions arising from the pandemic, impacts of governments’ responses to the pandemic on the Company’s operations, impacts of the pandemic on commercial activity, the Company’s customers and consumer preferences and demand, supply chain disruptions, and disruptions in the credit or financial markets; the results and impacts of acquisitions; economic, competitive and market conditions generally, including the impact of COVID-19; volumes and price levels of purchases by customers; competitive conditions in the Company’s businesses and possible adverse actions of our customers, competitors and suppliers; labor costs; the amount and timing of capital expenditures, including installation costs, project development and implementation costs, and costs related to resolving disputes with third parties with which we work to manage and implement our capital projects; severance and other shutdown costs; restructuring costs; utilization of real property that is subject to the restructurings due to realizable values from the sale of such property; credit availability; and raw material and energy costs. The Company’s businesses are subject to a number of risks that would affect any such forward-looking statements, including, among others, the level of demand for our products; our ability to respond effectively to the impact of COVID-19; our ability to successfully identify and make performance and productivity improvements; increases in energy, raw materials, shipping and capital equipment costs; reduced supply of raw materials; 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; fluctuations in selling prices and volumes; intense competition; the potential loss of certain customers; the scope, costs, timing and impact of any restructuring of our operations and corporate and tax structure; the occurrence of severe weather or a natural disaster 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; our desire or ability to continue to repurchase company stock; the scope, timing and outcome of any litigation, claims or other proceedings or dispute resolutions and the impact of any such litigation; and adverse changes in general market and industry conditions. Such risks and other factors that may impact management’s assumptions are more particularly described in our filings with the Securities and Exchange Commission, including in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020. The information contained herein speaks as of the date hereof and the Company does not have or undertake any obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

WestRock Company
Condensed Consolidated Statements of Operations
In millions, except per share amounts (unaudited)
		Three Months Ended								Twelve Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Net sales		$	5,090.5			$	4,471.5			$	18,746.1			$	17,578.8
Cost of goods sold			4,092.6				3,658.1				15,315.8				14,381.6
Gross profit			997.9				813.4				3,430.3				3,197.2
Selling, general and administrative, excluding intangible amortization			432.2				390.0				1,759.3				1,624.4
Selling, general and administrative intangible amortization			87.8				99.0				357.1				400.5
Loss (gain) on disposal of assets			0.3				(10.4	)			4.1				(16.3	)
Multiemployer pension withdrawal income			(2.9	)			–				(2.9	)			(1.1	)
Restructuring and other costs			11.7				56.5				31.5				112.7
Goodwill impairment			–				1,333.2				–				1,333.2
Operating profit (loss)			468.8				(1,054.9	)			1,281.2				(256.2	)
Interest expense, net			(92.5	)			(110.3	)			(372.3	)			(393.5	)
Loss on extinguishment of debt			(8.6	)			(0.4	)			(9.7	)			(1.5	)
Pension and other postretirement non-service income			33.5				24.9				134.9				103.3
Other (expense) income, net			(2.9	)			19.1				10.9				9.5
Equity in income of unconsolidated entities			11.5				7.1				40.9				15.8
Income (loss) before income taxes			409.8				(1,114.5	)			1,085.9				(522.6	)
Income tax expense			(85.2	)			(40.0	)			(243.4	)			(163.5	)
Consolidated net income (loss)			324.6				(1,154.5	)			842.5				(686.1	)
Less: Net income attributable to noncontrolling interests			(0.9	)			(1.5	)			(4.2	)			(4.8	)
Net income (loss) attributable to common stockholders		$	323.7			$	(1,156.0	)		$	838.3			$	(690.9	)
Computation of diluted earnings per share under the two-class method (in millions, except per share data):
Net income (loss) attributable to common stockholders		$	323.7			$	(1,156.0	)		$	838.3			$	(690.9	)
Less: Distributed and undistributed income available to participating securities			(0.1	)			–				(0.2	)			(0.1	)
Distributed and undistributed income (loss) available to common stockholders		$	323.6			$	(1,156.0	)		$	838.1			$	(691.0	)
Diluted weighted average shares outstanding			268.9				260.0				267.5				259.2
Diluted earnings (loss) per share		$	1.20			$	(4.45	)		$	3.13			$	(2.67	)

WestRock Company
Segment Information
In millions (unaudited)
		Three Months Ended								Twelve Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Net sales:
Corrugated Packaging		$	3,398.7			$	2,898.4			$	12,343.7			$	11,419.2
Consumer Packaging			1,783.0				1,627.2				6,702.7				6,333.0
Land and Development			–				–				–				18.9
Intersegment Eliminations			(91.2	)			(54.1	)			(300.3	)			(192.3	)
Total net sales		$	5,090.5			$	4,471.5			$	18,746.1			$	17,578.8
Income (loss) before income taxes:
Corrugated Packaging		$	374.8			$	281.9			$	1,116.8			$	1,037.7
Consumer Packaging			151.6				91.4				457.3				323.7
Land and Development			–				–				–				1.4
Total segment income			526.4				373.3				1,574.1				1,362.8
Gain on sale of certain closed facilities			–				10.1				0.9				15.6
Multiemployer pension withdrawal income			2.9				–				2.9				1.1
Restructuring and other costs			(11.7	)			(56.5	)			(31.5	)			(112.7	)
Goodwill impairment			–				(1,333.2	)			–				(1,333.2	)
Non-allocated expenses			(3.8	)			(16.6	)			(89.4	)			(70.7	)
Interest expense, net			(92.5	)			(110.3	)			(372.3	)			(393.5	)
Loss on extinguishment of debt			(8.6	)			(0.4	)			(9.7	)			(1.5	)
Other (expense) income, net			(2.9	)			19.1				10.9				9.5
Income (loss) before income taxes		$	409.8			$	(1,114.5	)		$	1,085.9			$	(522.6	)

WestRock Company
Condensed Consolidated Statements of Cash Flows
In millions (unaudited)
		Three Months Ended								Twelve Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Cash flows from operating activities:
Consolidated net income (loss)		$	324.6			$	(1,154.5	)		$	842.5			$	(686.1	)
Adjustments to reconcile consolidated net income to net cash provided
by operating activities:
Depreciation, depletion and amortization			365.1				365.6				1,460.0				1,487.0
Cost of real estate sold			–				–				–				16.1
Deferred income tax expense (benefit)			15.3				26.9				(38.3	)			43.0
Share-based compensation expense			14.2				31.9				88.6				130.3
401(k) match and company contribution in common stock			23.3				20.8				136.1				20.8
Pension and other postretirement funding more than expense (income)			(28.9	)			(19.4	)			(111.5	)			(80.1	)
Cash surrender value increase in excess of premiums paid			(0.6	)			(11.0	)			(49.4	)			(25.2	)
Gain on sale of sawmill			–				–				(16.5	)			–
Gain on sale of investment			–				–				(16.0	)			–
Goodwill impairment			–				1,333.2				–				1,333.2
Other impairment adjustments			12.0				23.6				34.6				25.8
(Gain) loss on disposal of plant and equipment and other, net			(0.1	)			(7.7	)			3.7				(13.2	)
Other, net			(4.1	)			5.1				(29.2	)			(15.2	)
Changes in operating assets and liabilities, net of acquisitions / divestitures:
Accounts receivable			(95.5	)			(51.9	)			(428.9	)			30.5
Inventories			(69.2	)			92.5				(200.0	)			21.8
Other assets			(229.9	)			(104.1	)			(379.6	)			(202.4	)
Accounts payable			233.1				153.7				430.3				(86.4	)
Income taxes			(69.3	)			(43.3	)			0.7				(27.6	)
Accrued liabilities and other			187.5				70.3				552.8				98.4
Net cash provided by operating activities			677.5				731.7				2,279.9				2,070.7
Investing activities:
Capital expenditures			(310.1	)			(117.9	)			(815.5	)			(978.1	)
Proceeds from corporate owned life insurance			18.3				7.2				44.9				16.9
Proceeds from sale of sawmill			–				–				58.5				–
Proceeds from sale of investments			–				–				29.5				–
Proceeds from sale of property, plant and equipment			2.0				12.5				6.3				35.0
Proceeds from property, plant and equipment insurance settlement			1.5				4.1				3.2				6.5
Other, net			(2.2	)			(2.0	)			(2.9	)			(1.8	)
Net cash used for investing activities			(290.5	)			(96.1	)			(676.0	)			(921.5	)
Financing activities:
Proceeds from issuance of notes			–				–				–				598.6
Additions to revolving credit facilities			–				15.0				435.0				428.0
Repayments of revolving credit facilities			(60.0	)			(50.0	)			(415.0	)			(528.2	)
Additions to debt			1.8				13.3				259.9				696.4
Repayments of debt			(412.8	)			(253.4	)			(1,544.3	)			(1,449.2	)
Repayments of commercial paper, net			–				(329.9	)			–				(339.2	)
Other debt additions (repayments), net			6.8				(11.1	)			23.1				(80.3	)
Issuances of common stock, net of related tax withholdings			3.5				5.5				18.2				22.2
Purchases of common stock			(122.4	)			–				(122.4	)			–
Cash dividends paid to stockholders			(64.0	)			(51.9	)			(233.8	)			(344.5	)
Other, net			8.0				(6.5	)			(1.1	)			(24.9	)
Net cash used for financing activities			(639.1	)			(669.0	)			(1,580.4	)			(1,021.1	)
Effect of exchange rate changes on cash and cash equivalents			(6.8	)			(7.0	)			16.3				(28.6	)
(Decrease) increase in cash and cash equivalents and restricted cash			(258.9	)			(40.4	)			39.8				99.5
Cash and cash equivalents, and restricted cash at beginning of period			549.8				291.5				251.1				151.6
Cash and cash equivalents, and restricted cash at end of period		$	290.9			$	251.1			$	290.9			$	251.1
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes, net of refunds		$	131.3			$	56.3			$	271.9			$	147.2
Interest, net of amounts capitalized		$	137.8			$	142.4			$	384.7			$	423.4

WestRock Company
Condensed Consolidated Balance Sheets
In millions (unaudited)
		September 30,			September 30,
		2021			2020
Assets
Current assets:
Cash and cash equivalents		$	290.9		$	251.1
Accounts receivable (net of allowances of $68.1 and $66.3)			2,586.9			2,142.7
Inventories			2,173.3			2,023.4
Other current assets			597.6			520.5
Assets held for sale			10.9			7.0
Total current assets			5,659.6			4,944.7
Property, plant and equipment, net			10,570.1			10,778.9
Goodwill			5,959.2			5,962.2
Intangibles, net			3,318.8			3,667.2
Restricted assets held by special purpose entities			1,260.5			1,267.5
Prepaid pension asset			674.3			368.7
Other assets			1,811.8			1,790.5
Total Assets		$	29,254.3		$	28,779.7
Liabilities and Equity
Current liabilities:
Current portion of debt		$	168.8		$	222.9
Accounts payable			2,123.7			1,674.2
Accrued compensation and benefits			656.8			386.7
Other current liabilities			694.8			645.1
Total current liabilities			3,644.1			2,928.9
Long-term debt due after one year			8,025.3			9,207.7
Pension liabilities, net of current portion			254.7			305.2
Postretirement medical liabilities, net of current portion			133.7			145.4
Non-recourse liabilities held by special purpose entities			1,127.3			1,136.5
Deferred income taxes			2,944.4			2,916.9
Other long-term liabilities			1,433.1			1,490.3
Redeemable noncontrolling interests			1.7			1.3
Total stockholders’ equity			11,670.3			10,630.6
Noncontrolling interests			19.7			16.9
Total Equity			11,690.0			10,647.5
Total Liabilities and Equity		$	29,254.3		$	28,779.7

Non-GAAP Financial Measures and Reconciliations

WestRock reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”). However, management believes certain non-GAAP financial measures provide WestRock’s board of directors, investors, potential investors, securities analysts and others with additional meaningful financial information that should be considered when assessing our ongoing performance. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions, and in evaluating WestRock’s performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, WestRock’s GAAP results. The non-GAAP financial measures we present may differ from similarly captioned measures presented by other companies. We discuss below details of the non-GAAP financial measures presented by us and provide reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.

Adjusted Segment EBITDA and Adjustments to Segment EBITDA

WestRock uses the non-GAAP financial measure “Adjusted Segment EBITDA”, along with other factors, to evaluate our segment performance. Management believes adjusting “Segment EBITDA” for certain items provides WestRock’s board of directors, investors, potential investors, securities analysts and others with useful information to evaluate WestRock’s performance across periods or relative to our peers, and that adjusting “Segment EBITDA” to “Adjusted Segment EBITDA” more closely aligns those results to the adjustments in Adjusted Net Income that relate to “Segment EBITDA”. The consolidated financial results and segment tables include a reconciliation of “Adjusted Segment EBITDA” to “Segment EBITDA” by adding certain “Adjustments” to “Segment EBITDA”. These “Adjustments” are reflected in the “Adjusted Net Income” reconciliation tables below.

Adjusted Segment Sales and Adjusted Segment EBITDA Margins

With respect to Adjusted Segment Sales, management believes that adjusting Segment Sales for trade sales is consistent with how peers present their sales for purposes of computing margins and helps WestRock’s board of directors, investors, potential investors, securities analysts and others compare companies in the same peer group. WestRock uses the non-GAAP financial measure “Adjusted Segment EBITDA Margins”, along with other factors, to evaluate our segment performance against our peers.

Contacts

Investors:

James Armstrong, 470-328-6327

Vice President, Investor Relations

[email protected]

Tim Murphy, 678-291-7363

Senior Vice President – Treasurer

[email protected]

Media:

Courtney James, 470-328-6397

Manager, Corporate Communications

[email protected]

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