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WestRock Reports Fiscal 2019 Fourth Quarter Results

Steve Voorhees - WestRock "The WestRock team executed well and delivered strong financial results for both the fourth quarter and the fiscal year," – Steve Voorhees, CEO, WestRock.

Nov. 7, 2019 - WestRock Company (NYSE:WRK), a leading provider of differentiated paper and packaging solutions, today announced results for its fiscal fourth quarter and fiscal year ended September 30, 2019.

Fourth Quarter 2019 Highlights

  • Earned $1.20 per diluted share and $1.24 of adjusted earnings per diluted share compared to $1.08 per diluted share and $1.29 of adjusted earnings per diluted share in the prior year quarter
  • Corrugated Packaging Segment EBITDA margin of 23.1% and North American Adjusted Segment EBITDA margin of 23.2%
  • Consumer Packaging Segment EBITDA margin and Adjusted Segment EBITDA margin of 16.1%, an increase of 50 basis points and 100 basis points, respectively, compared to the prior year quarter
  • Net cash provided by operating activities of $911 million and Adjusted Operating Cash Flow of $942 million; total debt declined by $475 million sequentially

Full Year 2019 and Other Highlights

  • Earned $3.33 per diluted share and $3.98 of adjusted earnings per diluted share compared to $7.34 and $4.09, respectively, in the prior year
  • Completed KapStone acquisition and achieved run rate of $90 million in synergies and performance improvements
  • Invested $1.37 billion in capital expenditures, including $0.5 billion in strategic capital projects
  • Generated net cash provided by operating activities of $2.31 billion and Adjusted Free Cash Flow of $1.04 billion
  • Returned $557 million to stockholders through dividends and stock repurchases
  • Reduced total debt by $757 million since December 31, 2018
  • Increased annual dividend by 2.2% to an annualized rate of $1.86 per share

“The WestRock team executed well and delivered strong financial results for both the fourth quarter and the fiscal year,” said Steve Voorhees, chief executive officer. “As we move forward into fiscal year 2020, we remain focused on organic growth, including partnering with our customers to develop fiber-based packaging solutions that help them meet their sustainability goals. With uncertain macro-economic conditions, we are acting to deliver on our productivity and cash flow generation goals.”

Operating Highlights for the Three Months Ended September 30, 2019 compared to September 30, 2018:

Net sales increased $415 million compared to the prior year quarter, primarily due to the acquisition of KapStone Paper and Packaging Corporation (“KapStone”). The KapStone acquisition-related increase in sales was partially offset by lower corrugated volumes and prices. The increase in net sales was also partially offset by the absence of $106 million of recycling net sales compared to the prior year quarter since the Company transitioned recycling to a procurement function and ceased recording recycling net sales at the beginning of fiscal 2019. Consumer Packaging segment net sales were lower by $41 million, primarily due to lower volumes and unfavorable foreign currency impacts.

Segment income increased $72 million compared to the prior year quarter, primarily due to $64 million of increased Corrugated Packaging segment income. Consumer Packaging segment income increased $5 million. The increase in consolidated segment income was primarily due to insurance proceeds related to the receipt of Hurricane Michael that were primarily associated with the Panama City, Florida, mill, the contribution from the acquired KapStone operations, productivity improvements and cost deflation. This was partially offset by lower selling price/mix and volumes.

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

Restructuring and Other Items

During the fourth quarter of fiscal 2019, the Company announced a plan to reconfigure the North Charleston, South Carolina, mill. The Company expects to shut down one paper machine in fiscal 2020 and reduce linerboard capacity by approximately 288,000 tons. After this shutdown, the mill will focus on manufacturing differentiated DuraSorb® and KraftPak® products. We anticipate the reconfiguration will reduce costs by $40 million on an annual run rate basis. Restructuring and other items during the fourth quarter of fiscal 2019 included the following pre-tax costs:

  • $21 million of restructuring costs associated with the North Charleston, South Carolina, mill, primarily consisting of impairment of equipment and severance and other employee costs
  • $34 million of restructuring costs, primarily associated with severance and other employee costs, including a voluntary retirement program and the consolidation of operations
  • $12 million of integration costs, primarily related to the KapStone acquisition

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

Net cash provided by operating activities was $911 million in the fourth quarter of fiscal 2019 compared to $796 million in the prior year quarter. As a result of the retrospective adoption of certain accounting standards discussed below under “Other Presentation Items”, net cash provided by operating activities for the three months ended September 30, 2018 decreased by $119 million with a corresponding decrease to net cash used for investing activities.

During the fourth quarter, the Company received $70 million of insurance proceeds related to Hurricane Michael. Of the $70 million, $61 million was included in net cash provided by operating activities and $9 million was included in net cash used for investing activities.

Total debt was $10.06 billion at September 30, 2019, or $9.83 billion excluding $228 million of unamortized fair market value step-up of debt acquired in mergers and acquisitions. Total debt in the fourth quarter of fiscal 2019 declined by $475 million sequentially. During the fourth quarter of fiscal 2019, the Company invested $392 million in capital expenditures and paid $117 million in dividends to stockholders.

WestRock's complete fiscal 2019 fourth quarter report including segment results can be found on the company's website: www.westrock.com.

WestRock partners with our customers to provide differentiated paper and packaging solutions that help them win in the marketplace. To learn more, visit: www.westrock.com.

SOURCE: WestRock Company