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WESTROCK COMPANY

(WRK)
  Report
Delayed Nyse  -  04:00 2022-09-23 pm EDT
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WESTROCK CO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/05/2022 | 11:28am EDT
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto included herein and our
audited Consolidated Financial Statements and Notes thereto for the fiscal year
ended September 30, 2021, as well as the information under the heading "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" that are part of the Fiscal 2021 Form 10-K. The following discussion
includes certain non-GAAP financial measures. See our reconciliations of
non-GAAP financial measures in the "Non-GAAP Financial Measures" section below.

                                    OVERVIEW

We are a multinational provider of sustainable fiber-based paper and packaging
solutions. We partner with our customers to provide 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.

Presentation


Effective October 1, 2021, we reorganized our segment reporting to four
reportable segments: Corrugated Packaging, Consumer Packaging, Global Paper and
Distribution. Also, effective October 1, 2021, our measure of segment
profitability for each reportable segment is Adjusted EBITDA in accordance with
ASC 280, "Segment Reporting" because it is the measure used by our CODM to make
decisions regarding allocation of resources and to assess segment performance.
Certain items are not allocated to our operating segments and, thus, the
information that our CODM uses to make operating decisions and assess
performance does not reflect such amounts. Adjusted EBITDA is defined as pre-tax
earnings of a reportable segment before depreciation, depletion and
amortization, and excludes the following items our CODM does not consider part
of our segment performance: gain on sale of certain closed facilities,
multiemployer pension withdrawal income, mineral rights impairment,
restructuring and other costs, non-allocated expenses, interest expense, net,
loss on extinguishment of debt, other (expense) income, net, and other
adjustments. Management believes excluding these items is useful in the
evaluation of operating performance from period to period because they are not
representative of our ongoing operations or are items our CODM does not consider
part of our reportable segments. We have recast prior periods presented to
conform with the new segment structure. These changes did not impact our
consolidated financial statements. In connection with the reorganization of our
reportable segments, we changed the amount of previously non-allocated expenses.
See "Note 6. Segment Information" for additional information.

                               EXECUTIVE SUMMARY

Net sales of $5,519.7 million for the third quarter of fiscal 2022 increased
$703.4 million, or 14.6%, compared to the third quarter of fiscal 2021. This
increase was primarily due to the impact of higher selling price/mix that was
partially offset by the unfavorable impact of foreign currency.

Net income attributable to common stockholders of $377.9 million for the third
quarter of fiscal 2022 increased $127.8 million, or 51.1%, compared to the third
quarter of fiscal 2021. The impact of higher selling price/mix was partially
offset by increased cost inflation, higher operating costs and lower volumes.
Consolidated Adjusted EBITDA of $1,005.5 million for the third quarter of fiscal
2022 increased $194.5 million, or 24.0%, compared to $811.0 million in the third
quarter of fiscal 2021. Net income in the quarter was also impacted by a $26.0
million pre-tax non-cash mineral rights impairment that was largely offset by
$18.7 million of insurance recoveries related to the fiscal 2021 ransomware
incident and winter weather event (the "Events"). The insurance recoveries were
primarily for business interruption costs and were recorded as a reduction of
Cost of goods sold.

Earnings per diluted share were $1.47 and $0.93 in the three months ended June
30, 2022 and 2021, respectively. Adjusted Earnings Per Diluted Share were $1.54
and $1.00 in the three months ended June 30, 2022 and 2021, respectively. See
the discussion and tables under "Non-GAAP Financial Measures" below with respect
to Consolidated Adjusted EBITDA and Adjusted Earnings Per Diluted Share.

Net cash provided by operating activities in the nine months ended June 30, 2022
and June 30, 2021 was $1,480.1 million and $1,602.4 million, respectively. The
decline was primarily due to $379.9 million of greater

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working capital usage compared to the prior year period. The greater working
capital usage was primarily due to actions taken in the prior year to preserve
cash due to the high uncertainty during the COVID pandemic, such as the payment
during the prior year period of certain bonuses and 401(k) match in stock rather
than in cash, and the payment of certain deferred payroll taxes that relate to
relief offered under the Coronavirus Aid, Relief and Economic Security Act
("CARES Act") in the current year period. During the nine months ended June 30,
2022, we invested $569.5 million in capital expenditures and returned $795.9
million in capital to stockholders, specifically $600.0 million in stock
repurchases and $195.9 million in dividend payments. During the nine months
ended June 30, 2022, debt decreased $171.2 million due to repayments primarily
using net cash provided by operating activities that exceeded aggregate capital
expenditures and capital returned to stockholders in the form of dividends and
share repurchases.

In the fourth quarter of fiscal 2022, we have approximately 45,000 tons of
scheduled maintenance downtime compared to 12,000 in the prior year period. We
expect the continued flow through of previously published price increases, and
that those increases will more than offset inflation. We expect higher inflation
costs sequentially, driven by higher natural gas costs and slightly higher
recycled fiber costs, partially offset by lower virgin fiber costs. We also
expect increased logistics costs. As a result of these, and other factors, we
expect higher earnings compared to the prior year period.

A detailed review of our performance appears below under "Results of Operations".

COVID Pandemic


The global impact of the COVID pandemic continues to evolve and our first
priority has been and continues to be the health and safety of our teammates. We
have taken, and continue to take, actions to protect the health and safety of
our teammates during COVID and we have incurred and continue to incur costs for
safety, cleaning and other items related to COVID. 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 or continuing variants), the actions taken to contain or
mitigate its impact (including the distribution and effectiveness of vaccines
and vaccine boosters), and the direct and indirect economic effects of the
pandemic and related containment measures and government responses, among
others.

Our net sales have been negatively impacted by COVID, to varying degrees,
primarily in the last half of fiscal 2020, and we have experienced and are
currently experiencing higher supply chain costs and labor shortages, in part
due to the impacts of COVID. Productivity, primarily in our Corrugated Packaging
segment, has been negatively impacted by COVID-related absenteeism, particularly
in the second quarter of fiscal 2022. While the negative impact in the third
quarter diminished, we may experience COVID-related absenteeism in future
periods, to varying degrees, depending upon the impact of new or continuing
variants. The Company's assessment of the future magnitude and duration of
COVID, as well as other factors, may change and could result in changes in our
accounting estimates and assumptions used to prepare our financial statements in
conformity with GAAP. In the first quarter of fiscal 2021 we recorded $22.0
million of relief payments to employees.

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.
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 of fiscal 2021 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.

As previously disclosed, 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. 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

                                       34
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million as a reduction of SG&A excluding intangible amortization and
approximately $5 million as a reduction of cost of goods sold. In the three and
nine months ended June 30, 2022, we received additional business interruption
recoveries of $10 million and $20 million, respectively, related to the
ransomware incident, which we recorded as a reduction of Cost of goods sold and
presented in Net cash provided by operating activities on our condensed
consolidated statements of cash flows.

While we expect to recover substantially all of the remaining ransomware losses
from cyber and business interruption insurance from various carriers in future
periods, the recovery process proceeds from carrier to carrier up the coverage
layers after the preceding layer is resolved, which lends itself to a lengthy
process. Additionally, discussions and/or disputes over the extent of insurance
coverage for claims are not uncommon and generally take time to be resolved.

See "Note 1. Description of Business and Summary of Significant Accounting Policies - Ransomware Incident" of the Notes to Consolidated Financial Statements section in the Fiscal 2021 Form 10-K for additional information.

                             RESULTS OF OPERATIONS

The following table summarizes our consolidated results for the three and nine months ended June 30, 2022 and June 30, 2021 (in millions):

                                          Three Months Ended             Nine Months Ended
                                               June 30,                      June 30,
                                          2022          2021            2022           2021
Net sales                               $ 5,519.7     $ 4,816.3      $ 15,854.0     $ 13,655.6
Cost of goods sold                        4,360.3       3,886.4        12,894.3       11,223.2
Gross profit                              1,159.4         929.9         2,959.7        2,432.4
Selling, general and administrative,
excluding
  intangible amortization                   504.3         450.9         1,450.3        1,327.1
Selling, general and administrative
intangible
  amortization                               87.5          88.8           263.6          269.3
(Gain) loss on disposal of assets            (0.2 )         1.0           (11.6 )          3.8
Multiemployer pension withdrawal
income                                          -             -            (3.3 )            -
Mineral rights impairment                    26.0             -            26.0              -
Restructuring and other costs                 0.6           6.9           366.3           19.8
Operating profit                            541.2         382.3           868.4          812.4
Interest expense, net                       (78.5 )      (102.5 )        (237.7 )       (279.8 )
Loss on extinguishment of debt                  -             -            (8.2 )         (1.1 )
Pension and other postretirement
non-service
  income                                     38.7          31.5           118.3          101.4
Other (expense) income, net                  (7.2 )         6.4            (0.7 )         13.8
Equity in income of unconsolidated
entities                                     18.3          10.7            57.3           29.4
Income before income taxes                  512.5         328.4           797.4          676.1
Income tax expense                         (132.7 )       (77.4 )        (193.1 )       (158.2 )
Consolidated net income                     379.8         251.0           604.3          517.9
Less: Net income attributable to
noncontrolling
  interests                                  (1.9 )        (0.9 )          (4.2 )         (3.3 )
Net income attributable to common
stockholders                            $   377.9     $   250.1      $    600.1     $    514.6



Net Sales (Unaffiliated Customers)

(In millions, except First Second Third Nine Months

       Fourth         Fiscal
percentages)          Quarter       Quarter        Quarter       Ended 6/30       Quarter         Year
Fiscal 2021          $ 4,401.5     $  4,437.8     $ 4,816.3     $   13,655.6     $ 5,090.5     $ 18,746.1
Fiscal 2022          $ 4,952.2     $  5,382.1     $ 5,519.7     $   15,854.0
% Change                  12.5 %         21.3 %        14.6 %           16.1 %



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Net sales in the third quarter of fiscal 2022 increased $703.4 million compared
to the third quarter of fiscal 2021. This increase was primarily due to the
impact of higher selling price/mix that was partially offset by the unfavorable
impact of foreign currency.

Net sales in the nine months ended June 30, 2022 increased $2,198.4 million
compared to the prior year period. This increase was primarily due to the impact
of higher selling price/mix and higher volumes which were partially offset by
the unfavorable impact of foreign currency. In the first nine months of fiscal
2021, we lost an estimated $189.1 million of net sales associated with the
Events, all in the second quarter.

The change in net sales by reportable segment is outlined below for each
reportable segment.

Cost of Goods Sold

(In millions,         First        Second         Third       Nine Months       Fourth         Fiscal
except percentages)  Quarter       Quarter       Quarter       Ended 6/30       Quarter         Year
Fiscal 2021         $ 3,648.6     $ 3,688.2     $ 3,886.4     $   11,223.2     $ 4,092.6     $ 15,315.8
(% of Net Sales)         82.9 %        83.1 %        80.7 %           82.2 

% 80.4 % 81.7 %

Fiscal 2022 $ 4,155.6 $ 4,378.4 $ 4,360.3 $ 12,894.3 (% of Net Sales) 83.9 % 81.4 % 79.0 %

           81.3 %



The $473.9 million increase in cost of goods sold in the third quarter of fiscal
2022 compared to the prior year quarter was primarily due to increased cost
inflation and higher operating costs. Cost inflation consisted primarily of
higher energy, freight, wage and benefit costs, recycled fiber, virgin fiber and
chemical costs.

The $1,671.1 million increase in cost of goods sold in the nine months ended
June 30, 2022 compared to the prior year period was primarily due increased cost
inflation, higher operating costs and increased planned downtime including
maintenance outages, which were partially offset by the prior year period
negative impact of the Events and related recoveries in fiscal 2022. Cost
inflation consisted primarily of higher recycled fiber, energy, wage and benefit
costs, freight, virgin fiber and chemical costs. In the first nine months of
fiscal 2021, we recorded $19.7 million of one-time recognition awards to our
teammates who work in manufacturing and operations.

In the third quarter of fiscal 2022, we entered into various natural gas
commodity derivatives that were designated as cash flow hedges for accounting
purposes and are scheduled to be settled over the next twelve months. See "Note
14. Equity and Other Comprehensive Income (Loss)" of the Notes to Condensed
Consolidated Financial Statements for additional information about the natural
gas commodity derivatives.

We discuss our operations in greater detail below for each reportable segment, as applicable.

Selling, General and Administrative Excluding Intangible Amortization

(In millions, except       First         Second        Third        Nine Months      Fourth        Fiscal
percentages)              Quarter       Quarter       Quarter       Ended 6/30       Quarter        Year
Fiscal 2021              $    417.8     $  458.4     $    450.9     $   1,327.1     $   432.2     $ 1,759.3
(% of Net Sales)                9.5 %       10.3 %          9.4 %           9.7 %         8.5 %         9.4 %

Fiscal 2022              $    452.9     $  493.1     $    504.3     $   1,450.3
(% of Net Sales)                9.1 %        9.2 %          9.1 %           9.1 %


Selling, general and administrative expenses ("SG&A") excluding intangible amortization increased $53.4 million in the third quarter of fiscal 2022 compared to the prior year quarter. The increase was primarily due to $25.5 million of increased compensation and benefits, $7.6 million of travel and entertainment costs and $7.5 million of bad debt costs.


SG&A excluding intangible amortization increased $123.2 million in the nine
months ended June 30, 2022 compared to the prior year period. The increase was
primarily due to $51.1 million of increased compensation and benefits, which
would have been higher had the prior year period not included a $9.6 million
acceleration of stock-based compensation in connection with the departure of our
former Chief Executive Officer. In addition, we incurred
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$17.4 million of increased bad debt expense, $17.1 million of increased software/computer expenses and $15.5 million of increased travel and entertainment costs. The increased travel and entertainment costs are still well below pre-pandemic levels.

Selling, General and Administrative Intangible Amortization


SG&A intangible amortization was $87.5 million and $88.8 million in the third
quarter of fiscal 2022 and 2021, respectively. SG&A intangible amortization was
$263.6 million and $269.3 million in the nine months ended June 30, 2022 and
2021, respectively. The expense primarily represents the amortization of
customer relationship intangibles acquired in business combinations.

(Gain) Loss on Disposal of Assets


In the three and nine months ended June 30, 2022, we recorded a gain on disposal
of assets of $0.2 million and a gain on disposal of assets of $11.6 million,
respectively. The gain was primarily due to the sale of a previously closed
facility in the first quarter of fiscal 2022. In the three and nine months ended
June 30, 2021, we recorded a loss on disposal of assets of $1.0 million and $3.8
million, respectively.

Mineral Rights Impairment

In the three and nine months ended June 30, 2022, we recorded a $26.0 million
pre-tax non-cash impairment of certain mineral rights driven by a lack of new
leasing or development activity on the related properties for an extended period
of time. With the impairment, we have no remaining mineral rights at June 30,
2022.

Restructuring and Other Costs



We recorded aggregate pre-tax restructuring and other costs of $0.6 million and
$6.9 million in the third quarter of fiscal 2022 and 2021, respectively, and
$366.3 million and $19.8 million in the nine months ended June 30, 2022 and
2021, respectively. The charges in the nine months ended June 30, 2022 were
primarily driven by our second quarter decision to permanently cease operations
at our Panama City, FL mill.

These amounts are not comparable since the timing and scope of the individual
actions associated with a given 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 3. Restructuring and Other Costs" of the Notes to
Condensed Consolidated Financial Statements for additional information.

Interest Expense, net


Interest expense, net for the third quarter of fiscal 2022 was $78.5 million
compared to $102.5 million for the prior year quarter. The decrease was
primarily due a $12.7 million reduction in interest expense associated with the
remeasurement of our multiemployer pension liabilities for the change in
interest rates in the third quarter of fiscal 2022 compared to a similar $7.7
million increase in the third quarter of fiscal 2021. In addition, interest
expense, net declined due to lower debt levels compared to the prior year period
that was partially offset by higher interest rates on debt in the current year
period.

Interest expense, net for the nine months ended June 30, 2022 was $237.7 million
compared to $279.8 million for the prior year period. The decrease was primarily
due to a net $26.9 million reduction in interest expense associated with the
remeasurement of our multiemployer pension liabilities for the change in
interest rates between the two nine month periods. In addition, interest
expense, net declined due to lower debt levels compared to the prior year period
that was partially offset by higher interest rates on debt in the nine months
ended June 30, 2022.

Loss on Extinguishment of Debt

Loss on extinguishment of debt for the nine months ended June 30, 2022 was $8.2 million related to our March 22, 2022 redemption of $350 million aggregate principal amount of our 4.00% senior notes due March 2023. Loss on extinguishment of debt for the nine months ended June 30, 2021 was $1.1 million.

                                       37
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Pension and Other Postretirement Non-Service Income


Pension and other postretirement non-service income for the third quarter of
fiscal 2022 was $38.7 million compared to $31.5 million for the third quarter of
fiscal 2021. Pension and other postretirement non-service income for the nine
months ended June 30, 2022 was $118.3 million compared to $101.4 million for the
nine months ended June 30, 2021. These increases were primarily due to the
increase in plan asset balances used to determine the expected return on plan
assets for fiscal 2022. Customary pension and other postretirement (income)
costs are included in our segment results. See "Note 4. Retirement Plans" of the
Notes to Condensed Consolidated Financial Statements for more information.

Other (Expense) Income, net


Other (expense) income, net for the third quarter of fiscal 2022 was expense of
$7.2 million compared to income of $6.4 million in the third quarter of fiscal
2021. The variance was primarily driven by impact of foreign currency on the
respective periods.

Other (expense) income, net for the nine months ended June 30, 2022 was expense
of $0.7 million compared to income of $13.8 million for the nine months ended
June 30, 2021. The nine months ended June 30, 2021 primarily included a $16.5
million gain on sale of the Summerville, SC sawmill and a $16.0 million gain on
sale of our Rosenbloom 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.

On July 27, 2022, we announced our entry into an agreement to acquire the remaining 67.7% interest in Grupo Gondi. See "Note 16. Subsequent Events" of the Notes to Condensed Consolidated Financial Statements for more information regarding the announcement.

Provision for Income Taxes


We recorded income tax expense of $132.7 million for the three months ended June
30, 2022 compared to $77.4 million for the three months ended June 30, 2021. The
effective tax rate for the three months ended June 30, 2022 was 25.9%, while the
effective tax rate for the three months ended June 30, 2021 was 23.6%.

We recorded income tax expense of $193.1 million for the nine months ended June
30, 2022 compared to $158.2 million for the nine months ended June 30, 2021. The
effective tax rate for the nine months ended June 30, 2022 was 24.2%, while the
effective tax rate for the nine months ended June 30, 2021 was 23.4%.

See "Note 5. Income Taxes" of the Notes to Condensed Consolidated Financial Statements for the primary factors impacting our effective tax rates.

Corrugated Packaging Segment

Corrugated Packaging Shipments


Corrugated Packaging shipments are expressed as a tons equivalent in thousands
of tons, which includes external and intersegment shipments from our corrugated
converting operations, principally for the sale of corrugated containers and
other corrugated products. Tons sold from period to period may be impacted by
customer conversions to lower basis weight products. In addition, we disclose
North American Corrugated Packaging shipments in billion square feet ("BSF") and
millions of square feet ("MMSF") per shipping day. We have presented the
Corrugated Packaging shipments in this manner because we believe investors,
potential investors, securities

                                       38
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analysts and others find this breakout useful when evaluating our operating
performance. Quantities in the table may not sum across due to trailing
decimals.

                                   First        Second         Third       Nine Months      Fourth        Fiscal
                                  Quarter       Quarter       Quarter      Ended 6/30       Quarter        Year
Fiscal 2021
Corrugated Packaging Shipments
-
  thousands of tons                1,729.4       1,662.7       1,709.6         5,101.7       1,678.7       6,780.4
North American Corrugated
Packaging
  Shipments - BSF                     25.3          24.6          25.3            75.3          24.5          99.8
North American Corrugated
Packaging Per
  Shipping Day - MMSF                415.3         391.2         401.7           402.6         383.2         397.6

Fiscal 2022
Corrugated Packaging Shipments
-
  thousands of tons                1,634.5       1,662.1       1,648.7         4,945.3
North American Corrugated
Packaging
  Shipments - BSF                     24.5          24.7          24.5            73.7
North American Corrugated
Packaging Per
  Shipping Day - MMSF                401.0         385.8         389.3           391.9


Corrugated Packaging Segment - Net Sales and Adjusted EBITDA


(In millions, except percentages)                                  Adjusted       Adjusted EBITDA
                                               Net Sales (1)        EBITDA             Margin

Fiscal 2021
First Quarter                                 $       2,019.5     $     347.6                 17.2 %
Second Quarter                                        2,022.4           321.1                 15.9
Third Quarter                                         2,154.7           363.9                 16.9
Nine Months Ended June 30, 2021                       6,196.6         1,032.6                 16.7
Fourth Quarter                                        2,203.9           361.4                 16.4
Total                                         $       8,400.5     $   1,394.0                 16.6 %

Fiscal 2022
First Quarter                                 $       2,220.0     $     288.9                 13.0 %
Second Quarter                                        2,319.0           328.7                 14.2
Third Quarter                                         2,382.5           385.2                 16.2
Nine Months Ended June 30, 2022               $       6,921.5     $   1,002.8                 14.5 %




(1)

Net sales before intersegment eliminations, also referred to as segment sales.

Net Sales (Aggregate) - Corrugated Packaging Segment


Net sales for the Corrugated Packaging segment increased $227.8 million in the
third quarter of fiscal 2022 compared to the prior year quarter. The increase
primarily consisted of $300.1 million of higher selling price/mix partially
offset by $84.1 million of lower volumes.

Net sales for the Corrugated Packaging segment increased $724.9 million in the
nine months ended June 30, 2022 compared to the prior year period. The increase
primarily consisted of $850.5 million of higher selling price/mix that was
partially offset by $148.8 million of lower volumes. The current period volume
comparison was improved by the $39.2 million negative impact in the prior year
period from the Events.
                                       39
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Adjusted EBITDA - Corrugated Packaging Segment


Corrugated Packaging segment Adjusted EBITDA in the third quarter of fiscal 2022
increased $21.3 million compared to the prior year quarter primarily due to an
estimated $300.3 million margin impact from higher selling price/mix that was
largely offset by an estimated $218.1 million of increased cost inflation, $34.8
million of lower volumes and $33.2 million higher operating costs. Productivity
was negatively impacted by higher supply chain costs and labor shortages, in
part due to the impacts of COVID.

Corrugated Packaging segment Adjusted EBITDA in the nine months ended June 30,
2022 decreased $29.8 million compared to the prior year period primarily due to
an estimated $647.8 million of increased cost inflation, $169.1 million higher
operating costs, $82.3 million of lower volumes excluding the Events in the
prior year period and a $12.9 million increase in planned downtime including
maintenance outages. These items were largely offset by a $852.5 million margin
impact from higher selling price/mix and the $27.4 million favorable impact on
the current period of the Events due to recoveries in the current year period
compared to the expense from the Events in the prior year period. Productivity
was negatively impacted by higher supply chain costs and labor shortages, in
part due to the impacts of COVID, as well as heavy planned mill maintenance in
the first half of fiscal 2022 and COVID related absenteeism primarily in the
second quarter of fiscal 2022.

Consumer Packaging Segment

Consumer Packaging Shipments


Consumer Packaging shipments are expressed as a tons equivalent in thousands of
tons, which includes external and intersegment shipments from our consumer
converting operations, principally for the sale of folding cartons, interior
partitions and other consumer products. We have presented the Consumer Packaging
shipments in this manner because we believe investors, potential investors,
securities analysts and others find this breakout useful when evaluating our
operating performance. Quantities in the table may not sum across due to
trailing decimals.

                                  First        Second       Third       Nine Months      Fourth       Fiscal
                                 Quarter      Quarter      Quarter      Ended 6/30      Quarter        Year
Fiscal 2021
Consumer Packaging Shipments -
  thousands of tons                 374.9        379.1        386.4         

1,140.4 389.5 1,529.9


Fiscal 2022
Consumer Packaging Shipments -
  thousands of tons                 374.2        401.3        399.3         1,174.8



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Consumer Packaging Segment - Net Sales and Adjusted EBITDA


(In millions, except percentages)                                                       Adjusted EBITDA
                                               Net Sales (1)       Adjusted EBITDA          Margin

Fiscal 2021
First Quarter                                 $       1,062.5     $           175.3                16.5 %
Second Quarter                                        1,080.6                 164.1                15.2
Third Quarter                                         1,132.2                 183.3                16.2
Nine Months Ended June 30, 2021                       3,275.3                 522.7                16.0
Fourth Quarter                                        1,158.6                 198.1                17.1
Total                                         $       4,433.9     $           720.8                16.3 %

Fiscal 2022
First Quarter                                 $       1,138.7     $           169.3                14.9 %
Second Quarter                                        1,250.6                 205.8                16.5
Third Quarter                                         1,270.2                 234.9                18.5
Nine Months Ended June 30, 2022               $       3,659.5     $           610.0                16.7 %




(1)

Net sales before intersegment eliminations, also referred to as segment sales.

Net Sales (Aggregate) - Consumer Packaging Segment


The $138.0 million increase in net sales for the Consumer Packaging segment in
the third quarter of fiscal 2022 compared to the prior year quarter was
primarily due to $122.4 million of higher selling price/mix and $58.3 million of
higher volumes. These increases were partially offset by $44.0 million of
unfavorable foreign currency impacts.

The $384.2 million increase in net sales for the Consumer Packaging segment in
the nine months ended June 30, 2022 compared to the prior year period was
primarily due to $298.6 million of higher selling price/mix and $176.0 million
impact of higher volumes, including the $12.1 million negative impact from the
Events in the prior year period. These increases were partially offset by $86.4
million of unfavorable foreign currency impacts.

Adjusted EBITDA - Consumer Packaging Segment


Consumer Packaging segment Adjusted EBITDA in the third quarter of fiscal 2022
increased $51.6 million compared to the prior year quarter primarily due to an
estimated $122.0 million margin impact from higher selling price/mix and $8.6
million of higher volumes. These items were partially offset by an estimated
$76.9 million of increased cost inflation and $7.5 million of unfavorable
foreign currency impacts.

Consumer Packaging segment Adjusted EBITDA in the nine months ended June 30,
2022 increased $87.3 million compared to the prior year period primarily due to
an estimated $283.1 million margin impact from higher selling price/mix, $45.7
million of higher volumes excluding the Events, $18.6 million of increased
productivity and other operational items, and a $6.8 million favorable impact
from the Events due to recoveries in the current year period compared to the
expense from the Events in the prior year period. These items were partially
offset by an estimated $245.9 million of increased cost inflation, $14.9 million
of unfavorable foreign currency impacts and a $5.8 million increase in planned
downtime including maintenance outages.

Global Paper Segment

Global Paper Shipments


Global Paper shipments in thousands of tons includes the sale of containerboard,
paperboard, market pulp and specialty papers (including kraft papers and
saturating kraft) to external customers. The shipment data table excludes gypsum
paperboard liner tons produced by our Seven Hills Paperboard LLC joint venture
in Lynchburg, VA since it is not consolidated. We have presented the Global
Paper shipments in this manner because we believe

                                       41
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investors, potential investors, securities analysts and others find this breakout useful when evaluating our operating performance. Quantities in the table may not sum across due to trailing decimals.

                                       First        Second         Third       Nine Months      Fourth        Fiscal
                                      Quarter       Quarter       Quarter      Ended 6/30       Quarter        Year
Fiscal 2021
Global Paper Shipments - thousands
  of tons                              1,461.7       1,482.7       1,588.6  

4,533.0 1,738.7 6,271.6


Fiscal 2022
Global Paper Shipments - thousands
  of tons                              1,515.9       1,658.2       1,632.7         4,806.8


Global Paper Segment - Net Sales and Adjusted EBITDA


(In millions, except percentages)                                                      Adjusted EBITDA
                                              Net Sales (1)       Adjusted EBITDA           Margin

Fiscal 2021
First Quarter                                $       1,090.9     $           151.7                 13.9 %
Second Quarter                                       1,130.6                 159.6                 14.1
Third Quarter                                        1,299.2                 265.2                 20.4
Nine Months Ended June 30, 2021                      3,520.7                 576.5                 16.4
Fourth Quarter                                       1,462.3                 307.2                 21.0
Total                                        $       4,983.0     $           883.7                 17.7 %

Fiscal 2022
First Quarter                                $       1,352.6     $           232.4                 17.2 %
Second Quarter                                       1,538.1                 308.6                 20.1
Third Quarter                                        1,610.3                 399.0                 24.8
Nine Months Ended June 30, 2022              $       4,501.0     $           940.0                 20.9 %




(1)

Net sales before intersegment eliminations, also referred to as segment sales.

Net Sales (Aggregate) - Global Paper Segment


The $311.1 million increase in net sales for the Global Paper segment in the
third quarter of fiscal 2022 compared to the prior year quarter was primarily
due to $297.0 million of higher selling price/mix and $38.7 million of higher
volumes.

The $980.3 million increase in net sales for the Global Paper segment in the
nine months ended June 30, 2022 compared to the prior year period was primarily
due to $854.4 million of higher selling price/mix and $210.4 million of higher
volumes, including the $134.8 million negative impact on volumes in the prior
year period from the Events. These increases were partially offset by the
absence of $33.7 million of sales from the sawmill we sold in the second quarter
fiscal 2021.

Adjusted EBITDA - Global Paper Segment


Global Paper segment Adjusted EBITDA in the third quarter of fiscal 2022
increased $133.8 million compared to the prior year quarter primarily due to a
$297.0 million margin impact from higher selling price/mix, $14.4 million of
higher volumes, $9.1 million of favorable foreign currency impacts and a $5.9
million decrease in planned downtime including maintenance outages. These items
were partially offset by an estimated $162.9 million of increased cost inflation
and $37.0 million higher operating costs.

Global Paper segment Adjusted EBITDA in the nine months ended June 30, 2022
increased $363.5 million compared to the prior year period primarily due to a
$854.4 million margin impact from higher selling price/mix, a $70.6 million
favorable impact from the Events due to recoveries in the current year period
compared to the expense
                                       42
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from the Events in the prior year period and $24.1 million of higher volumes
excluding the Events. These items were partially offset by an estimated $515.7
million of increased cost inflation, $56.7 million higher operating costs and a
$14.8 million increase in planned downtime including maintenance outages.

Distribution Segment

Distribution Shipments


Distribution shipments are expressed as a tons equivalent in thousands of tons,
which includes external and intersegment shipments from our distribution and
display assembly operations. We have presented the Distribution shipments in
this manner because we believe investors, potential investors, securities
analysts and others find this breakout useful when evaluating our operating
performance. Quantities in the table may not sum across due to trailing
decimals.

                                                                              Nine
                                   First        Second         Third         Months        Fourth       Fiscal
                                  Quarter       Quarter       Quarter      Ended 6/30      Quarter       Year
Fiscal 2021
Distribution Shipments -
thousands of tons                     56.4          53.6          64.5          174.5          53.1       227.6

Fiscal 2022
Distribution Shipments -
thousands of tons                     48.5          50.8          59.8          159.1


Distribution Segment - Net Sales and Adjusted EBITDA


(In millions, except percentages)                                                      Adjusted EBITDA
                                              Net Sales (1)      Adjusted EBITDA           Margin

Fiscal 2021
First Quarter                                $         303.8     $           16.4                   5.4 %
Second Quarter                                         280.3                 11.0                   3.9
Third Quarter                                          322.3                 18.0                   5.6
Nine Months Ended June 30, 2021                        906.4                 45.4                   5.0
Fourth Quarter                                         348.4                 23.4                   6.7
Total                                        $       1,254.8     $           68.8                   5.5 %

Fiscal 2022
First Quarter                                $         324.8     $            6.5                   2.0 %
Second Quarter                                         362.3                 28.0                   7.7
Third Quarter                                          357.7                 19.2                   5.4
Nine Months Ended June 30, 2022              $       1,044.8     $           53.7                   5.1 %




(1)

Net sales before intersegment eliminations, also referred to as segment sales.

Net Sales (Aggregate) - Distribution Segment

The $35.4 million increase in net sales for the Distribution segment in the third quarter of fiscal 2022 compared to the prior year quarter was primarily due to $40.8 million of higher selling price/mix partially offset by $5.7 million of lower volumes.


The $138.4 million increase in net sales for the Distribution segment in the
nine months ended June 30, 2022 compared to the prior year period was primarily
due to $96.3 million of higher selling price/mix and $38.0 million of higher
volumes, primarily related to fulfillment of a large healthcare order in the
second quarter of fiscal 2022.

Adjusted EBITDA - Distribution Segment

Distribution segment Adjusted EBITDA in the third quarter of fiscal 2022 increased $1.2 million compared to the prior year quarter primarily due to a $40.8 million margin impact from higher selling price/mix and a $9.4 million

                                       43
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increase in productivity and other operational items. These items were largely offset by an estimated $47.2 million of increased cost inflation and $2.1 million of lower volumes.


Distribution segment Adjusted EBITDA in the nine months ended June 30, 2022
increased $8.3 million compared to the prior year quarter primarily due a $96.3
million margin impact from higher selling price/mix and $19.6 million from
higher volumes. These items were largely offset by an estimated $103.0 million
of increased cost inflation and $4.9 million higher operating costs.

                        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 the sale of receivables under 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 11. Debt" of the Notes to
Condensed Consolidated Financial Statements and "Note 13. Debt" of the Notes to
Consolidated Financial Statements section in the Fiscal 2021 Form 10-K 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.

Cash and cash equivalents were $305.4 million at June 30, 2022 and $290.9
million at September 30, 2021. Approximately two-thirds of the cash and cash
equivalents at June 30, 2022 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 period. At June 30, 2022 and September 30, 2021, total debt was $8,022.9
million and $8,194.1 million, respectively, $387.8 million and $168.8 million of
which was short-term at June 30, 2022 and September 30, 2021, respectively.
Included in our total debt at June 30, 2022 was $179.6 million of non-cash
acquisition-related step-up. During the nine months ended June 30, 2022, debt
decreased $171.2 million due to repayments primarily using net cash provided by
operating activities that exceeded aggregate capital expenditures and capital
returned to stockholders in the form of dividends and share repurchases.

At June 30, 2022, we had approximately $3.5 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. 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 March 22, 2022, we redeemed $350 million aggregate principal amount of our 4.00% senior notes due March 2023 primarily using borrowings under our Receivables Securitization Facility and recorded an $8.2 million loss on extinguishment of debt.


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 June 30, 2022.

At June 30, 2022, we had $58.9 million of outstanding letters of credit not drawn upon.


We use a variety of working capital management strategies, including supply
chain financing ("SCF") programs, vendor financing and commercial card programs,
monetization facilities where we sell short-term receivables to a group of
third-party financial institutions and receivables securitization facilities. We
describe these programs below.

We engage in certain customer-based SCF programs to accelerate the receipt of
payment for outstanding accounts receivables from certain customers. Certain
costs of these programs are borne by the customer or us. Receivables transferred
under these customer-based SCF programs generally meet the requirements to be
accounted for as sales in accordance with guidance under ASC 860, "Transfers and
Servicing" resulting in derecognition of such receivables from our consolidated
balance sheets. Receivables involved with these customer-based SCF programs
constitute approximately 2% of our annual net sales. In addition, we have
monetization facilities that sell to third-party financial institutions all of
the short-term receivables generated from certain customer trade accounts. See
"Note 10. Fair Value - Accounts Receivable Sales Agreements" for a discussion of
our monetization facilities.

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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
items Accounts payable and Other current liabilities in our condensed
consolidated balance sheets and the activity is reflected in net cash provided
by operating activities in our condensed 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 16% to 18% 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 the Receivables Securitization
Facility that allows for borrowing availability based on the eligible underlying
accounts receivable and compliance with certain covenants. See "Note 11. Debt"
for a discussion of our Receivables Securitization Facility and the amount
outstanding under our vendor financing and commercial card programs.

Cash Flow Activity

                                               Nine Months Ended
(In millions)                                      June 30,
                                              2022          2021

Net cash provided by operating activities $ 1,480.1 $ 1,602.4 Net cash used for investing activities $ (514.2 ) $ (385.5 ) Net cash used for financing activities $ (965.8 ) $ (941.3 )




Net cash provided by operating activities during the nine months ended June 30,
2022 decreased $122.3 million compared to the nine months ended June 30, 2021,
primarily due to $379.9 million of greater working capital usage compared to the
prior year period. The greater working capital usage in the nine months ended
June 30, 2022 was primarily due to actions taken in the prior year to preserve
cash due to the high uncertainty during the COVID pandemic, such as the payment
during the prior year period of certain bonuses and 401(k) match in stock rather
than in cash, and the payment of certain deferred payroll taxes that relate to
relief offered under the CARES Act in the current year.

Net cash used for investing activities of $514.2 million in the nine months
ended June 30, 2022 consisted primarily of $569.5 million for capital
expenditures that was partially offset by $29.8 million of proceeds from
corporate owned life insurance and $25.6 million of proceeds from the sale of
property, plant and equipment, primarily for the sale of a previously closed
facility. Net cash used for investing activities of $385.5 million in the nine
months ended June 30, 2021 consisted primarily of $505.4 million for capital
expenditures that were partially offset by $58.5 million of proceeds from the
sale of the Summerville, SC sawmill, $29.5 million of proceeds from the sale of
investments and $26.6 million of proceeds from corporate owned life insurance.

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 had previously expected capital expenditures to be approximately $900 million to $1.0 billion in fiscal 2022. At this level of capital investment, we expect that we will

                                       45
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continue to invest in safety, environmental and maintenance projects while also
making investments to support productivity and growth in our business. Based on
investments made as of the nine months ended June 30, 2022 and supply chain and
other delays, we now expect to invest approximately $900 million in fiscal 2022.
However, it is possible that our capital expenditure assumptions may change,
project completion dates may change, or we may decide to invest a different
amount depending upon opportunities we identify, or changes in market
conditions, or to comply with environmental or other regulatory changes.

In the nine months ended June 30, 2022, net cash used for financing activities
of $965.8 million consisted primarily of share repurchases of $600.0 million,
cash dividends paid to stockholders of $195.9 million and a net decrease in debt
of $195.3 million. In the nine months ended June 30, 2021, net cash used for
financing activities of $941.3 million consisted primarily of a net decrease in
debt of $777.1 million and cash dividends paid to stockholders of $169.8
million.

On July 29, 2022, our board of directors declared a quarterly dividend of $0.25
per share. In May 2022, February 2022 and November 2021, we paid quarterly
dividends of $0.25 per share, respectively, representing a $1.00 per share
annualized dividend or an increase of 25% since our February 2021 dividend. In
May 2021, February 2021 and November 2020, we paid quarterly dividends of $0.24,
$0.20 and $0.20 per share, respectively.

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. On May 4, 2022, our board of
directors authorized a new repurchase program of up to 25.0 million shares of
our Common Stock, plus any unutilized shares left from the July 2015
authorization. The 25.0 million shares represents an additional authorization of
approximately 10% of our outstanding Common Stock. The shares of Common Stock
may be repurchased 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. Pursuant to the programs, in the nine
months ended June 30, 2022, we repurchased approximately 12.6 million shares of
our Common Stock for an aggregate cost of $597.5 million. The amount reflected
as purchased in the condensed consolidated statements of cash flows varies due
to the timing of share settlement. In the nine months ended June 30, 2021, we
repurchased no shares of Common Stock. As of June 30, 2022, we had approximately
29.0 million shares of Common Stock available for repurchase under the program.

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 at the
end of the previous fiscal year. These items are primarily for foreign and state
net operating losses and credits that generally will be utilized between fiscal
2022 and 2040. 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 and
our cash tax rate in fiscal 2023 will be driven slightly higher than our income
tax rate.

Our pension plans in the U.S. are overfunded and we have a $0.8 billion pension
asset on our condensed consolidated balance sheet as of June 30, 2022. We made
contributions of $15.1 million to our pension and supplemental retirement plans
during the nine months ended June 30, 2022. Based on current facts and
assumptions, we expect to contribute approximately $17 million to our U.S. and
non-U.S. pension plans in fiscal 2022. 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 Protection Act of 2006
and other regulations. Our estimates are based on current factors, such as
discount rates and expected return on plan assets. It is possible that our
assumptions may change, actual market performance may vary or we may decide to
contribute different amounts.

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, 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. Going forward, we expect to pay approximately $12 million a year in
withdrawal liabilities, excluding accumulated funding deficiency demands and any
settlement payments. With respect to certain other MEPPs, in the event we
withdraw from one or more of the MEPPs in the
                                       46
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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 June 30, 2022 and September 30, 2021, we had recorded withdrawal liabilities
of $219.6 million and $247.1 million, respectively, including liabilities
associated with PIUMPF's accumulated funding deficiency demands. The decrease in
withdrawal liabilities in fiscal 2022 as compared to the end of fiscal 2021 was
primarily due to an increase in interest rates. See "Note 4. Retirement Plans -
MEPPs" of the Notes to Condensed Consolidated Financial Statements for more
information regarding these liabilities. See also Item 1A. "Risk Factors - We
May Incur Withdrawal Liability and/or Increased Funding Requirements in
Connection with MEPPs" in our Fiscal 2021 Form 10-K.

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.

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              Stated Coupon
     (in millions)              Rate              Maturity Date            Referred to as:

$                  500              3.000 %    September 2024         the 2024 Notes
$                  600              3.750 %    March 2025             the 2025 Notes
$                  750              4.650 %    March 2026             the 2026 Notes
$                  500              3.375 %    September 2027         the 2027 Notes
$                  600              4.000 %    March 2028             the 2028 Notes
$                  500              3.900 %    June 2028              the June 2028 Notes
$                  750              4.900 %    March 2029             the 2029 Notes
$                  500              4.200 %    June 2032              the 2032 Notes
$                  600              3.000 %    June 2033              the June 2033 Notes



Upon issuance, the Notes maturing in 2024, 2025, 2027 and March 2028 were fully
and unconditionally guaranteed by WestRock RKT, LLC ("RKT") and WestRock MWV,
LLC ("MWV", and together with RKT, the "Guarantor Subsidiaries"). On November 2,
2018, pursuant to the Agreement and Plan of Merger, 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"). On November 2, 2018, in
connection with 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 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
                                       47
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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 are holding companies that conducts substantially
all of their 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 unaudited Condensed 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.

                                       48

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses

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