WestRock Reports Fiscal 2021 First Quarter Results
WestRock Company (NYSE:WRK) reported fiscal first-quarter results for the period ending December 31, 2020, showcasing net sales of $4.4 billion, unchanged from the previous year. The company achieved a 5% increase in total packaging shipments, with North American box shipments rising 8%. Adjusted earnings per diluted share were $0.61, up from $0.58 year-over-year. Strong cash flow was evident with $719 million from operations and $562 million in adjusted free cash flow. However, segment income decreased, attributed to reduced sales in Corrugated Packaging.
- Net cash provided by operating activities increased to $719 million from $431 million year-over-year.
- Adjusted earnings per diluted share rose to $0.61, compared to $0.58 the previous year.
- Total packaging shipments increased by 5%, with a record 8% rise in North American box shipments.
- Net sales decreased by $22 million compared to the prior year quarter.
- Segment income decreased by $23.5 million, driven primarily by a decline in the Corrugated Packaging segment.
WestRock Company (NYSE:WRK), a leading provider of differentiated paper and packaging solutions, today announced results for its fiscal first quarter ended December 31, 2020.
Notable items in the first quarter of fiscal 2021 include:
-
Net sales of
$4.4 billion were essentially flat compared to the pre-pandemic prior year quarter -
Total packaging shipments increased
5% ; record North American per day box shipments that increased8% compared to the prior year quarter - Successfully started up the Company’s new 330” state-of-the-art paper machine in Florence, South Carolina; the machine’s 710k tons of annual capacity replaces three old machines
-
Distributed COVID-19 relief payments to employees totaling
$22 million ; these payments are not included in the Company's adjusted earnings per diluted share for the quarter -
Earned
$0.57 per diluted share and$0.61 of adjusted earnings per diluted share compared to$0.53 of earnings per diluted share and$0.58 of adjusted earnings per diluted share, respectively, in the prior year quarter -
Generated net cash provided by operating activities of
$719 million and Adjusted Free Cash Flow of$562 million compared to$431 million and$79 million , respectively, in the prior year quarter
“During the first fiscal quarter, the WestRock team delivered solid financial results and generated strong cash flow resulting in debt and leverage reduction, with record box shipments and growth in key end markets,” said Steve Voorhees, chief executive officer. “We continue to work around the clock to restore normal operations from the ransomware attack as quickly as possible, and to safely produce the paper and packaging needed by our customers and our communities. As we look to the future, we remain confident in our strategy and our ability to generate strong cash flow and 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 December 31, 2020 and December 31, 2019 (in millions):
Three Months Ended |
|
|
|||||||
Dec. 31, 2020 |
|
Dec. 31, 2019 |
|
Change |
|||||
| Net sales | $ |
4,401.5 |
$ |
4,423.7 |
$ |
(22.2) |
|||
| Segment income | $ |
307.5 |
$ |
331.0 |
$ |
(23.5) |
|||
| Non-allocated expenses |
|
(23.8) |
|
(18.2) |
|
(5.6) |
|||
| Depreciation |
|
264.2 |
|
271.4 |
|
(7.2) |
|||
| Amortization |
|
100.3 |
|
109.8 |
|
(9.5) |
|||
| Segment EBITDA |
|
648.2 |
|
694.0 |
|
(45.8) |
|||
| Adjustments (1) |
|
21.6 |
|
(18.7) |
|
40.3 |
|||
| Adjusted Segment EBITDA | $ |
669.8 |
$ |
675.3 |
$ |
(5.5) |
|||
| (1) See the Adjusted Net Income tables on page 11 for adjustments | |||||||||
Operating Highlights for the Three Months Ended December 31, 2020 compared to December 31, 2019:
Net sales decreased
Additional information about the changes in segment net sales and income is included below.
Restructuring and Other Items
Restructuring and other items during the first quarter of fiscal 2021 included the following pre-tax costs:
-
$7 million of restructuring costs, primarily related to severance for voluntary early retirements and other initiatives, as well as costs associated with previously announced plant consolidations -
$1 million of integration costs, primarily related to the fiscal 2019 acquisition of KapStone Paper and Packaging Corporation (“KapStone”)
Net Cash Provided By Operating Activities and Other Financing and Investing Activities
Net cash provided by operating activities was
Total debt was
Segment Results
WestRock’s segment performance for the three months ended December 31, 2020 and December 31, 2019 (in millions):
Corrugated Packaging Segment
Three Months Ended |
|
|
|||||||
Dec. 31, 2020 |
|
Dec. 31, 2019 |
|
Change |
|||||
| Segment net sales | $ |
2,864.5 |
$ |
2,909.5 |
$ |
(45.0) |
|||
| Segment income | $ |
215.0 |
$ |
283.4 |
$ |
(68.4) |
|||
| Depreciation |
|
182.0 |
|
186.5 |
|
(4.5) |
|||
| Amortization |
|
50.3 |
|
57.8 |
|
(7.5) |
|||
| Segment EBITDA |
|
447.3 |
|
527.7 |
|
(80.4) |
|||
| Adjustments (1) |
|
10.6 |
|
(20.1) |
|
30.7 |
|||
| Adjusted Segment EBITDA | $ |
457.9 |
$ |
507.6 |
$ |
(49.7) |
|||
| (1) See the Adjusted Net Income tables on page 11 for adjustments | |||||||||
Operating Highlights for the Three Months Ended December 31, 2020 compared to December 31, 2019:
Segment net sales decreased
Segment income decreased
These factors were partially offset by
Consumer Packaging Segment
Three Months Ended |
|
|
|||||||
Dec. 31, 2020 |
|
Dec. 31, 2019 |
|
Change |
|||||
| Segment net sales | $ |
1,595.1 |
$ |
1,536.9 |
$ |
58.2 |
|||
| Segment income | $ |
92.5 |
$ |
46.2 |
$ |
46.3 |
|||
| Depreciation |
|
81.0 |
|
83.3 |
|
(2.3) |
|||
| Amortization |
|
50.0 |
|
52.0 |
|
(2.0) |
|||
| Segment EBITDA |
|
223.5 |
|
181.5 |
|
42.0 |
|||
| Adjustments (1) |
|
10.2 |
|
2.8 |
|
7.4 |
|||
| Adjusted Segment EBITDA | $ |
233.7 |
$ |
184.3 |
$ |
49.4 |
|||
| (1) See Adjusted Net Income tables on page 11 for adjustments | |||||||||
Operating Highlights for the Three Months Ended December 31, 2020 compared to December 31, 2019:
Segment net sales increased
Segment income increased
Ransomware Incident
On January 25, 2021, the Company announced a ransomware incident that occurred on January 23rd impacting certain of its operational and information technology systems.
WestRock’s security teams, supported by leading cyber defense firms, continue to work on remediation of and recovery from this incident. With some exceptions, the Company’s operations have continued to run and deliver for customers. In locations where technology issues have been identified, we are using alternative methods to process and ship orders.
The Company will discuss the ransomware incident on its fiscal first quarter conference call referenced below.
Conference Call
WestRock will host a conference call to discuss its results of operations for the fiscal first quarter ended December 31, 2020 and other topics that may be raised during the discussion at 8:30 a.m., Eastern Time, on Thursday, January 28, 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 833-360-0873 (inside the U.S.) or 478-219-0243 (outside the U.S.) at least 15 minutes prior to the start of the call and enter the passcode 7865486. Replays of the call can be accessed at ir.westrock.com.
About WestRock
WestRock (NYSE:WRK) partners with our customers to provide differentiated 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 as we look to the future, we remain confident in our strategy and our ability to generate strong cash flow and 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 Company’s ability to effectively integrate the operations of KapStone; the Company’s ability to effectively respond to the recent ransomware incident; 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; the Company’s ongoing assessment of the recent ransomware incident, adverse legal, reputational and financial effects on the Company resulting from the incident or additional cyber incidents and the effectiveness of the Company’s business continuity plans during the 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; our ability to realize anticipated synergies from the KapStone acquisition; 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 Income | ||||||||
| In millions, except per share amounts (unaudited) | ||||||||
Three Months Ended |
||||||||
December 31, |
||||||||
|
2020 |
|
|
|
2019 |
|
||
| Net sales | $ |
4,401.5 |
|
$ |
4,423.7 |
|
||
| Cost of goods sold |
|
3,648.6 |
|
|
3,614.7 |
|
||
| Gross profit |
|
752.9 |
|
|
809.0 |
|
||
| Selling, general and administrative, excluding intangible amortization |
|
417.8 |
|
|
425.7 |
|
||
| Selling, general and administrative intangible amortization |
|
91.9 |
|
|
101.8 |
|
||
| Loss (gain) on disposal of assets |
|
2.5 |
|
|
(1.3 |
) |
||
| Restructuring and other costs |
|
7.7 |
|
|
30.1 |
|
||
| Operating profit |
|
233.0 |
|
|
252.7 |
|
||
| Interest expense, net |
|
(93.8 |
) |
|
(93.5 |
) |
||
| Loss on extinguishment of debt |
|
(1.1 |
) |
|
- |
|
||
| Pension and other postretirement non-service income |
|
34.9 |
|
|
26.7 |
|
||
| Other income (expense), net |
|
20.8 |
|
|
(3.7 |
) |
||
| Equity in income of unconsolidated entities |
|
9.0 |
|
|
3.8 |
|
||
| Income before income taxes |
|
202.8 |
|
|
186.0 |
|
||
| Income tax expense |
|
(50.3 |
) |
|
(46.5 |
) |
||
| Consolidated net income |
|
152.5 |
|
|
139.5 |
|
||
| Less: Net income attributable to noncontrolling interests |
|
(0.5 |
) |
|
(1.0 |
) |
||
| Net income attributable to common stockholders | $ |
152.0 |
|
$ |
138.5 |
|
||
| Computation of diluted earnings per share under the two-class method (in millions, except per share data): | ||||||||
| Net income attributable to common stockholders | $ |
152.0 |
|
$ |
138.5 |
|
||
| Less: Distributed and undistributed income available to participating securities |
|
- |
|
|
- |
|
||
| Distributed and undistributed income available to common stockholders | $ |
152.0 |
|
$ |
138.5 |
|
||
| Diluted weighted average shares outstanding |
|
264.8 |
|
|
259.9 |
|
||
| Diluted earnings per share | $ |
0.57 |
|
$ |
0.53 |
|
||
| WestRock Company | ||||||||
| Segment Information | ||||||||
| In millions (unaudited) | ||||||||
Three Months Ended |
||||||||
December 31, |
||||||||
|
2020 |
|
|
|
2019 |
|
||
| Net sales: | ||||||||
| Corrugated Packaging | $ |
2,864.5 |
|
$ |
2,909.5 |
|
||
| Consumer Packaging |
|
1,595.1 |
|
|
1,536.9 |
|
||
| Land and Development |
|
- |
|
|
18.9 |
|
||
| Intersegment Eliminations |
|
(58.1 |
) |
|
(41.6 |
) |
||
| Total net sales | $ |
4,401.5 |
|
$ |
4,423.7 |
|
||
| Income before income taxes: | ||||||||
| Corrugated Packaging | $ |
215.0 |
|
$ |
283.4 |
|
||
| Consumer Packaging |
|
92.5 |
|
|
46.2 |
|
||
| Land and Development |
|
- |
|
|
1.4 |
|
||
| Total segment income |
|
307.5 |
|
|
331.0 |
|
||
| Gain on sale of certain closed facilities |
|
0.9 |
|
|
0.5 |
|
||
| Restructuring and other costs |
|
(7.7 |
) |
|
(30.1 |
) |
||
| Non-allocated expenses |
|
(23.8 |
) |
|
(18.2 |
) |
||
| Interest expense, net |
|
(93.8 |
) |
|
(93.5 |
) |
||
| Loss on extinguishment of debt |
|
(1.1 |
) |
|
- |
|
||
| Other income (expense), net |
|
20.8 |
|
|
(3.7 |
) |
||
| Income before income taxes | $ |
202.8 |
|
$ |
186.0 |
|
||
| WestRock Company | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| In millions (unaudited) | ||||||||
Three Months Ended |
||||||||
December 31, |
||||||||
|
2020 |
|
|
|
2019 |
|
||
| Cash flows from operating activities: | ||||||||
| Consolidated net income | $ |
152.5 |
|
$ |
139.5 |
|
||
| Adjustments to reconcile consolidated net income to net cash provided | ||||||||
| by operating activities: | ||||||||
| Depreciation, depletion and amortization |
|
364.5 |
|
|
381.2 |
|
||
| Cost of real estate sold |
|
- |
|
|
16.1 |
|
||
| Deferred income tax (benefit) expense |
|
(19.6 |
) |
|
3.1 |
|
||
| Share-based compensation expense |
|
20.0 |
|
|
13.8 |
|
||
| 401(k) match in common stock |
|
24.9 |
|
|
- |
|
||
| Pension and other postretirement funding more than expense (income) |
|
(28.0 |
) |
|
(23.7 |
) |
||
| Gain on sale of investment |
|
(14.7 |
) |
|
- |
|
||
| Other impairment adjustments |
|
- |
|
|
2.2 |
|
||
| Loss (gain) on disposal of plant and equipment and other, net |
|
2.6 |
|
|
(0.9 |
) |
||
| Other, net |
|
(31.5 |
) |
|
(13.2 |
) |
||
| Changes in operating assets and liabilities, net of acquisitions / divestitures: | ||||||||
| Accounts receivable |
|
150.2 |
|
|
153.9 |
|
||
| Inventories |
|
(44.3 |
) |
|
(83.9 |
) |
||
| Other assets |
|
(19.3 |
) |
|
(71.1 |
) |
||
| Accounts payable |
|
(5.4 |
) |
|
(47.5 |
) |
||
| Income taxes |
|
50.6 |
|
|
(2.8 |
) |
||
| Accrued liabilities and other |
|
116.9 |
|
|
(35.5 |
) |
||
| Net cash provided by operating activities |
|
719.4 |
|
|
431.2 |
|
||
| Investing activities: | ||||||||
| Capital expenditures |
|
(170.7 |
) |
|
(374.8 |
) |
||
| Investment in unconsolidated entities |
|
(0.1 |
) |
|
(0.3 |
) |
||
| Proceeds from sale of investment |
|
23.3 |
|
|
- |
|
||
| Proceeds from sale of property, plant and equipment |
|
2.0 |
|
|
7.9 |
|
||
| Proceeds from property, plant and equipment insurance settlement |
|
- |
|
|
1.4 |
|
||
| Other, net |
|
5.1 |
|
|
4.9 |
|
||
| Net cash used for investing activities |
|
(140.4 |
) |
|
(360.9 |
) |
||
| Financing activities: | ||||||||
| Additions to revolving credit facilities |
|
180.0 |
|
|
- |
|
||
| Repayments of revolving credit facilities |
|
(10.0 |
) |
|
(20.0 |
) |
||
| Additions to debt |
|
10.8 |
|
|
101.4 |
|
||
| Repayments of debt |
|
(704.5 |
) |
|
(4.0 |
) |
||
| Additions to commercial paper, net |
|
- |
|
|
10.9 |
|
||
| Other debt additions (repayments), net |
|
21.6 |
|
|
(36.3 |
) |
||
| Issuances of common stock, net of related minimum tax withholdings |
|
(12.4 |
) |
|
15.5 |
|
||
| Cash dividends paid to stockholders |
|
(52.6 |
) |
|
(120.0 |
) |
||
| Cash distributions paid to noncontrolling interests |
|
(0.4 |
) |
|
(0.3 |
) |
||
| Other, net |
|
(16.6 |
) |
|
(8.5 |
) |
||
| Net cash used for financing activities |
|
(584.1 |
) |
|
(61.3 |
) |
||
| Effect of exchange rate changes on cash and cash equivalents |
|
7.8 |
|
|
(4.2 |
) |
||
| Increase in cash and cash equivalents and restricted cash |
|
2.7 |
|
|
4.8 |
|
||
| Cash and cash equivalents, and restricted cash at beginning of period |
|
251.1 |
|
|
151.6 |
|
||
| Cash and cash equivalents, and restricted cash at end of period | $ |
253.8 |
|
$ |
156.4 |
|
||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes, net of refunds | $ |
18.8 |
|
$ |
45.1 |
|
||
| Interest, net of amounts capitalized | $ |
42.0 |
|
$ |
53.1 |
|
||
| WestRock Company | ||||||
| Condensed Consolidated Balance Sheets | ||||||
| In millions (unaudited) | ||||||
December 31, |
|
September 30, |
||||
2020 |
|
2020 |
||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ |
253.8 |
$ |
251.1 |
||
| Accounts receivable (net of allowances of |
|
2,023.4 |
|
2,142.7 |
||
| Inventories |
|
2,084.6 |
|
2,023.4 |
||
| Other current assets |
|
492.6 |
|
520.5 |
||
| Assets held for sale |
|
9.4 |
|
7.0 |
||
| Total current assets |
|
4,863.8 |
|
4,944.7 |
||
| Property, plant and equipment, net |
|
10,784.3 |
|
10,778.9 |
||
| Goodwill |
|
5,997.0 |
|
5,962.2 |
||
| Intangibles, net |
|
3,598.1 |
|
3,667.2 |
||
| Restricted assets held by special purpose entities |
|
1,265.8 |
|
1,267.5 |
||
| Prepaid pension asset |
|
404.7 |
|
368.7 |
||
| Other assets |
|
1,922.7 |
|
1,790.5 |
||
| Total Assets | $ |
28,836.4 |
$ |
28,779.7 |
||
| Liabilities and Equity | ||||||
| Current liabilities: | ||||||
FAQ
What were WestRock's earnings per share for the first quarter of fiscal 2021?
How did WestRock's net sales perform in the first quarter of fiscal 2021?
What were the main drivers behind the changes in WestRock's packaging shipments?
What is the current status of WestRock's debt after the first quarter of fiscal 2021?
What impacts did the ransomware attack have on WestRock's operations?
