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EX-32.1 - EXHIBIT 32.1 - WestRock Coexhibit321q317.htm
EX-31.2 - EXHIBIT 31.2 - WestRock Coexhibit312q317.htm
EX-31.1 - EXHIBIT 31.1 - WestRock Coexhibit311q317.htm
EX-10.2 - EXHIBIT 10.2 - WestRock Coexhibit102q317.htm
EX-10.1 - EXHIBIT 10.1 - WestRock Coexhibit101q317.htm

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
Form 10-Q
x
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended June 30, 2017
or
o
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from              to             
Commission File Number 001-37484
WestRock Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware
 
47-3335141
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
501 South 5th Street, Richmond, Virginia
 
23219-0501
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (804) 444-1000

N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer x
 
Accelerated filer o
Non-accelerated filer o (Do not check if smaller reporting company)
 
Smaller reporting company o
Emerging growth company o
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Class
 
Outstanding as of July 28, 2017
Common Stock, $0.01 par value
 
254,000,527
 



WESTROCK COMPANY
INDEX
 
 
 
Page
PART I
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 6.
 
 
 
 
 
 
 


2


Glossary of Terms

The following terms or acronyms used in this Form 10-Q are defined below:                    
Term or Acronym
 
Definition
 
 
 
Adjusted Earnings from Continuing Operations Per Diluted Share
 
As defined on p. 54
Adjusted Income from Continuing Operations
 
As defined on p. 54
Antitrust Litigation
 
As defined on p. 37
A/R Sales Agreement
 
As defined on p. 31
ASC
 
FASB’s Accounting Standards Codification
ASU
 
Accounting Standards Update
Boiler MACT
 
As defined on p. 35
BSF
 
Billion square feet
CERCLA
 
The Comprehensive Environmental Response, Compensation, and Liability Act of 1980
Clean Power Plan
 
As defined on p. 36
Code
 
The Internal Revenue Code of 1986, as amended
Combination
 
Pursuant to the Second Amended and Restated Business Combination Agreement, dated as of April 17, 2015 and amended as of May 5, 2015 by and among WestRock, RockTenn, MWV, Rome Merger Sub, Inc., and Milan Merger Sub, LLC, (i) Rome Merger Sub, Inc was merged with and into RockTenn, with RockTenn surviving the merger as a wholly owned subsidiary of WestRock, and (ii) Milan Merger sub, LLC was merged with and into MWV, with MWV surviving the merger as a wholly owned subsidiary of WestRock, which occurred on July 1, 2015
Common Stock
 
WestRock common stock, par value $0.01 per share
containerboard
 
Linerboard and corrugating medium
Credit Agreement
 
As defined on p. 30
Credit Facility
 
As defined on p. 30
EPA
 
U.S. Environmental Protection Agency
FASB
 
Financial Accounting Standards Board
Farm Credit Facility
 
As defined on p. 30
Farm Loan Credit Agreement
 
As defined on p. 30
FIFO
 
First-in first-out inventory valuation method
Fiscal 2016 Form 10-K
 
WestRock’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016
GAAP
 
Generally accepted accounting principles in the U.S.
GHG
 
Greenhouse gases
GPS
 
Green Power Solutions of Georgia, LLC
Grupo Gondi
 
Gondi, S. dc R.L. de C.V.
Hanna Group
 
Hanna Group Pty Ltd
Hannapak Acquisition
 
The August 1, 2017 acquisition of Hanna Group Pty Ltd
HH&B
 
Home, Health and Beauty, a former division of our Consumer Packaging segment
HH&B Sale
 
The April 6, 2017 sale of HH&B
IDBs
 
Industrial Development Bonds
Ingevity
 
Ingevity Corporation, formerly the Specialty Chemicals business of WestRock

3


Term or Acronym
 
Definition
 
 
 
Island Container Acquisition
 
The July 17, 2017 acquisition of certain assets and liabilities of Island Container Corp. and Combined Container Industries LLC, which together are independent producers of corrugated boxes, sheets and point-of-purchase displays
LIFO
 
Last-in first-out inventory valuation method
MEPP or MEPPs
 
Multiemployer pension plan(s)
MMSF
 
Millions of square feet
MPS
 
Multi Packaging Solutions International Limited, a Bermuda exempted company
MPS Acquisition
 
The June 6, 2017 acquisition of MPS pursuant to a merger agreement among WestRock, MPS and WRK Merger Sub Limited
MWV
 
WestRock MWV, LLC, formerly MeadWestvaco Corporation
Packaging Acquisition
 
The January 19, 2016 acquisition of certain legal entities formerly owned by Cenveo Inc.
Paris Agreement
 
An agreement signed in April 2016 among the U.S. and over 170 other countries which arose out of negotiations at the United Nation’s Conference of Parties (COP21) climate summit in December 2015
Pension Act
 
Pension Protection Act of 2006
Plan
 
WestRock Company Consolidated Pension Plan
PRP or PRPs
 
Potentially responsible party (parties)
Receivables Facility
 
Our $700.0 million receivables-backed financing facility that expires on July 22, 2019
RockTenn
 
WestRock RKT Company, formerly Rock-Tenn Company
SARs
 
Stock appreciation rights
SEC
 
Securities and Exchange Commission
Separation
 
The May 15, 2016 distribution of the outstanding common stock, par value $0.01 per share, of Ingevity to WestRock’s stockholders
Seven Hills
 
Seven Hills Paperboard LLC
SG&A
 
Selling, general and administrative expenses
Silgan
 
Silgan Holdings Inc.
Smurfit-Stone
 
Smurfit-Stone Container Corporation
SP Fiber
 
SP Fiber Holdings, Inc.
SP Fiber Acquisition
 
The October 1, 2015 acquisition of SP Fiber
Star Pizza Acquisition
 
The March 13, 2017 acquisition of certain assets and liabilities of Star Pizza Inc.
U.S.
 
United States
U.S. Corrugated
 
U.S. Corrugated Holdings, Inc.
U.S. Corrugated Acquisition
 
The June 9, 2017 acquisition of U.S. Corrugated
WestRock
 
WestRock Company
WestRock MWV, LLC
 
Formerly named MWV
WestRock RKT Company
 
Formerly named RockTenn


4


PART I: FINANCIAL INFORMATION

Item 1.
FINANCIAL STATEMENTS (UNAUDITED)

WESTROCK COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Millions, Except Per Share Data)
 
 
Three Months Ended
 
Nine Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Net sales
$
3,695.6

 
$
3,596.5

 
$
10,799.1

 
$
10,560.1

Cost of goods sold
3,000.1

 
2,869.2

 
8,836.9

 
8,520.8

Gross profit
695.5

 
727.3

 
1,962.2

 
2,039.3

Selling, general and administrative, excluding intangible amortization
348.1

 
341.5

 
1,033.5

 
1,019.4

Selling, general and administrative intangible amortization
54.6

 
53.3

 
156.8

 
159.4

Pension lump sum settlement

 

 
28.7

 

Land and Development impairment

 

 
42.7

 

Restructuring and other costs, net
59.4

 
43.1

 
158.7

 
317.0

Operating profit
233.4

 
289.4

 
541.8

 
543.5

Interest expense
(70.4
)
 
(64.0
)
 
(201.3
)
 
(193.2
)
Gain on extinguishment of debt
2.0

 

 
1.9

 

Interest income and other income (expense), net
15.0

 
20.9

 
41.3

 
43.2

Equity in income of unconsolidated entities
16.7

 
5.8

 
36.9

 
6.8

Gain on sale of HH&B
190.6

 

 
190.6

 

Income from continuing operations before income taxes
387.3

 
252.1

 
611.2

 
400.3

Income tax expense
(60.7
)
 
(99.7
)
 
(107.9
)
 
(159.1
)
Income from continuing operations
326.6

 
152.4

 
503.3

 
241.2

Loss from discontinued operations, net of income tax benefit of $0, $46.2, $0 and $39.0

 
(58.7
)
 

 
(539.4
)
Consolidated net income (loss)
326.6

 
93.7

 
503.3

 
(298.2
)
Less: Net loss (income) attributable to noncontrolling interests
1.5

 
(1.4
)
 
8.8

 
(6.1
)
Net income (loss) attributable to common stockholders
$
328.1

 
$
92.3

 
$
512.1

 
$
(304.3
)
 
 
 
 
 
 
 
 
Basic earnings per share from continuing operations
$
1.30

 
$
0.60

 
$
2.04

 
$
0.94

Basic loss per share from discontinued operations


 
(0.23
)
 

 
(2.13
)
Basic earnings (loss) per share attributable to common stockholders
$
1.30

 
$
0.37

 
$
2.04

 
$
(1.19
)
 
 
 
 
 
 
 
 
Diluted earnings per share from continuing operations
$
1.29

 
$
0.59

 
$
2.01

 
$
0.93

Diluted loss per share from discontinued operations


 
(0.23
)
 

 
(2.11
)
Diluted earnings (loss) per share attributable to common stockholders
$
1.29

 
$
0.36

 
$
2.01

 
$
(1.18
)
 
 
 
 
 
 
 
 
Cash dividends paid per share
$
0.40

 
$
0.375

 
$
1.20

 
$
1.125


See Accompanying Notes to Condensed Consolidated Financial Statements

5


WESTROCK COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In Millions)
 
Three Months Ended
 
Nine Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Consolidated net income (loss)
$
326.6

 
$
93.7

 
$
503.3

 
$
(298.2
)
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Foreign currency:
 
 
 
 
 
 
 
Foreign currency translation gain
26.1

 
35.6

 
4.7

 
133.3

Reclassification adjustment of net loss on foreign currency translation included in earnings

 
20.2

 

 
20.2

Sale of HH&B
26.8

 

 
26.8

 

Derivatives:
 
 
 
 
 
 
 
Deferred (loss) gain on cash flow hedges
(0.3
)
 
0.1

 
(0.4
)
 
(0.5
)
Reclassification adjustment of net (gain) loss on cash flow hedges included in earnings
(0.1
)
 
0.4

 
(0.1
)
 
1.0

Defined benefit pension plans:
 
 
 
 
 
 
 
Net actuarial gain arising during the period
0.2

 

 
20.7

 
1.4

Amortization and settlement recognition of net actuarial loss, included in pension cost
3.4

 
1.5

 
30.2

 
4.9

Prior service cost arising during the period

 

 
(0.9
)
 

Amortization and curtailment recognition of prior service (credit) cost, included in pension cost
(0.1
)
 
0.2

 
(0.4
)
 
0.8

Sale of HH&B
2.9

 

 
2.9

 

Other comprehensive income
58.9

 
58.0

 
83.5

 
161.1

Comprehensive income (loss)
385.5

 
151.7

 
586.8

 
(137.1
)
Less: Comprehensive loss (income) attributable to noncontrolling interests
0.8

 
(1.5
)
 
8.3

 
(6.3
)
Comprehensive income (loss) attributable to common stockholders
$
386.3

 
$
150.2

 
$
595.1

 
$
(143.4
)

See Accompanying Notes to Condensed Consolidated Financial Statements



6


WESTROCK COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Millions, Except Share Data) 
 
June 30,
2017
 
September 30,
2016
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
225.2

 
$
340.9

Restricted cash
5.9

 
25.5

Accounts receivable (net of allowances of $49.3 and $36.5)
1,902.4

 
1,592.2

Inventories
1,767.1

 
1,638.2

Other current assets
257.0

 
263.5

Assets held for sale
200.7

 
52.3

Total current assets
4,358.3

 
3,912.6

Property, plant and equipment, net
9,077.3

 
9,294.3

Goodwill
5,466.2

 
4,778.1

Intangibles, net
3,325.3

 
2,599.3

Restricted assets held by special purpose entities
1,288.9

 
1,293.8

Prepaid pension asset
354.1

 
257.8

Other assets

999.9

 
902.3

 
$
24,870.0

 
$
23,038.2

LIABILITIES AND EQUITY
Current liabilities:
 
 
 
Current portion of debt
$
710.5

 
$
292.9

Accounts payable
1,452.7

 
1,054.4

Accrued compensation and benefits
388.0

 
405.9

Other current liabilities
507.7

 
429.8

Total current liabilities
3,058.9

 
2,183.0

Long-term debt due after one year
5,812.3

 
5,496.3

Pension liabilities, net of current portion
292.2

 
328.1

Postretirement benefit liabilities, net of current portion
142.9

 
140.0

Non-recourse liabilities held by special purpose entities
1,163.9

 
1,170.2

Deferred income taxes
3,378.4

 
3,130.7

Other long-term liabilities
812.0

 
746.2

Commitments and contingencies (Note 16)

 


Redeemable noncontrolling interests
12.8

 
13.7

Equity:
 
 
 
Preferred stock, $0.01 par value; 30.0 million shares authorized; no shares outstanding

 

Common Stock, $0.01 par value; 600.0 million shares authorized; 253.9 million and 251.0 million shares outstanding at June 30, 2017 and September 30, 2016, respectively
2.5

 
2.5

Capital in excess of par value
10,610.6

 
10,458.6

Retained earnings (accumulated deficit)
79.3

 
(105.9
)
Accumulated other comprehensive loss
(543.4
)
 
(626.4
)
Total stockholders’ equity
10,149.0

 
9,728.8

Noncontrolling interests
47.6

 
101.2

Total equity
10,196.6

 
9,830.0

 
$
24,870.0

 
$
23,038.2


See Accompanying Notes to Condensed Consolidated Financial Statements

7


WESTROCK COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions)
 
Nine Months Ended
 
June 30,
 
2017
 
2016
Operating activities:
 
 
 
Consolidated net income (loss)
$
503.3

 
$
(298.2
)
Adjustments to reconcile consolidated net income (loss) to net cash provided by
operating activities:
 
 
 
Depreciation, depletion and amortization
814.3

 
867.7

Cost of real estate sold
188.4

 
50.1

Deferred income tax (benefit) expense
(45.7
)
 
35.4

Share-based compensation expense
50.0

 
51.8

Gain on extinguishment of debt
(1.9
)
 

(Gain) loss on disposal of plant, equipment and other, net
(5.3
)
 
1.9

Equity in income of unconsolidated entities
(36.9
)
 
(6.8
)
Pension and other postretirement funding (more) than expense (income)
(34.1
)
 
(69.0
)
Loss on contribution of subsidiary
1.7

 

Gain on Grupo Gondi investment

 
(12.1
)
Gain on sale of HH&B
(190.6
)
 

Cash surrender value increase in excess of premiums paid
(27.6
)
 
(23.7
)
Impairment adjustments
50.5

 
191.3

Distributed earnings from equity investments
14.6

 
7.4

Other non-cash items
(32.5
)
 
(34.1
)
Land and Development impairment
42.7

 

Impairment of Specialty Chemicals goodwill and intangibles

 
579.4

Change in operating assets and liabilities, net of acquisitions and divestitures:
 
 
 
Accounts receivable
(138.3
)
 
51.0

Inventories
(31.4
)
 
25.8

Other assets
(67.7
)
 
(86.7
)
Accounts payable
290.3

 
(104.1
)
Income taxes
37.9

 
(13.0
)
Accrued liabilities and other
24.5

 
92.7

Net cash provided by operating activities
1,406.2

 
1,306.8

Investing activities:
 
 
 
Capital expenditures
(536.8
)
 
(614.7
)
Cash paid for purchase of businesses, net of cash acquired
(1,443.8
)
 
(376.4
)
Debt purchased in connection with an acquisition

 
(36.5
)
Corporate-owned life insurance premium paid
(1.4
)
 

Investment in unconsolidated entities
(2.2
)
 
(178.5
)
Return of capital from unconsolidated entities
12.6

 
5.4

Proceeds from sale of subsidiary and affiliates
9.3

 
10.2

Proceeds from the sale of HH&B
993.5

 

Proceeds from sale of property, plant and equipment
40.8

 
10.9

Net cash used for investing activities
(928.0
)
 
(1,179.6
)
Financing activities:
 
 
 
Additions to revolving credit facilities
518.0

 
180.6

Additions to debt
417.0

 
1,458.3

Repayments of debt
(1,121.7
)
 
(1,012.2
)
Other financing additions
11.2

 
2.5

Debt issuance costs
(2.1
)
 
(3.6
)
Specialty Chemicals spin-off of cash and trust funding

 
(118.9
)
Issuances of common stock, net of related minimum tax withholdings
22.3

 
(3.8
)
Purchases of common stock
(93.0
)
 
(285.1
)
Excess tax benefits from share-based compensation
3.0

 
0.1

Advances from (repayments to) unconsolidated entity
1.2

 
(1.0
)

8


 
Nine Months Ended
 
June 30,
 
2017
 
2016
Cash dividends paid to shareholders
(301.6
)
 
(286.3
)
Cash distributions paid to noncontrolling interests
(45.9
)
 
(21.8
)
Net cash used for financing activities
(591.6
)
 
(91.2
)
Effect of exchange rate changes on cash and cash equivalents
(2.3
)
 
(5.6
)
(Decrease) increase in cash and cash equivalents
(115.7
)
 
30.4

Cash and cash equivalents from continuing operations, at beginning of period
340.9

 
207.8

Cash and cash equivalents from discontinued operations, at beginning of period

 
20.5

Balance of cash and cash equivalents at beginning of period
340.9

 
228.3

Cash and cash equivalents from continuing operations, at end of period
225.2

 
258.7

Cash and cash equivalents from discontinued operations, at end of period

 

Cash and cash equivalents at end of period
$
225.2

 
$
258.7

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Income taxes, net of refunds
$
112.1

 
$
118.5

Interest, net of amounts capitalized
$
138.9

 
$
136.5


Supplemental schedule of non-cash operating and investing activities:

The formation of the Grupo Gondi joint venture consisted of a contribution of $175.0 million in cash and the stock of an entity that owns three corrugated packaging facilities in Mexico in return for a 25.0% equity participation in the joint venture valued at approximately $0.3 billion. The entity was deconsolidated as of April 1, 2016, which resulted in the derecognition and recognition of the following non-cash items (in millions):
 
Nine Months Ended
June 30, 2016
Derecognized:
 
Accounts receivable
$
34.7

Inventories
$
25.8

Other assets
$
86.3

Accounts payable
$
(15.4
)
Income taxes
$
(1.0
)
Accrued liabilities and other
$
(18.8
)
 
 
Recognized:
 
Investment in unconsolidated entities
$
(123.7
)

Supplemental schedule of non-cash investing and financing activities:

Liabilities assumed in the nine months ended June 30, 2017 relate to the MPS Acquisition, the U.S. Corrugated Acquisition and the Star Pizza Acquisition. Liabilities assumed in the nine months ended June 30, 2016 relate to the SP Fiber Acquisition and the Packaging Acquisition. For additional information regarding these acquisitions, see Note 5. Acquisitions and Investment.


9


 
Nine Months Ended
 
June 30,
 
2017
 
2016
 
(In millions)
Fair value of assets acquired, including goodwill
$
3,197.4

 
$
583.4

Cash consideration for the purchase of businesses, net of cash acquired (1)
(1,447.3
)
 
(376.4
)
Debt purchased in connection with an acquisition

 
(36.5
)
Unreceived working capital or escrow
4.0

 

Stock issued for the purchase of a business
(136.1
)
 

Fair value of share-based awards issued in the purchase of a business
(1.9
)
 

Liabilities and noncontrolling interests assumed
$
1,616.1

 
$
170.5

 
 
 
 
Included in liabilities assumed is the following item:
 
 
 
Debt assumed
$
929.1

 
$
15.0

(1) The nine months ended June 30, 2017 amount is different from the condensed consolidated statements of cash flows line item “cash paid for the purchase of businesses, net of cash acquired” as the statement of cash flow amount is net of the receipt of a $3.5 million escrow payment related to the Packaging Acquisition.



See Accompanying Notes to Condensed Consolidated Financial Statements

10


WESTROCK COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Month Periods Ended June 30, 2017
(Unaudited)
Unless the context otherwise requires, “we”, “us”, “our”, “WestRock” and “the Company” refer to the business of WestRock Company, its wholly-owned subsidiaries and its partially-owned consolidated subsidiaries.

We are a multinational provider of paper and packaging solutions for consumer and corrugated packaging markets. We partner with our customers to provide differentiated paper and packaging solutions that help them win in the marketplace. Our team members support customers around the world from operating and business locations spanning North America, South America, Europe and Asia.

Note 1.
Interim Financial Statements

Our independent registered public accounting firm has not audited our accompanying interim financial statements. We derived the Condensed Consolidated Balance Sheet at September 30, 2016 from the audited Consolidated Financial Statements included in our Fiscal 2016 Form 10-K. In the opinion of our management, the Condensed Consolidated Financial Statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our statements of operations for the three and nine months ended June 30, 2017 and June 30, 2016, our comprehensive income (loss) for the three and nine months ended June 30, 2017 and June 30, 2016, our financial position at June 30, 2017 and September 30, 2016, and our cash flows for the nine months ended June 30, 2017 and June 30, 2016.

On May 15, 2016, WestRock completed the Separation. Ingevity is now an independent public company trading under the symbol “NGVT” on the New York Stock Exchange. With the completion of the Separation, we disposed of the former Specialty Chemicals segment in its entirety and ceased to consolidate its assets, liabilities and results of operations in our consolidated financial statements. Accordingly, we have presented the results of operations of the former Specialty Chemicals segment prior to the Separation as discontinued operations in the accompanying condensed consolidated financial statements. See “Note 6. Discontinued Operations” for more information.

On January 23, 2017, we announced we had entered into an agreement with certain subsidiaries of Silgan under which Silgan would purchase HH&B. Accordingly, in the second quarter of fiscal 2017, all the assets and liabilities of HH&B were reported in the Condensed Consolidated Balance Sheet as assets and liabilities held for sale. On April 6, 2017, we sold HH&B. See “Note 7. Assets Held For Sale” for more information. The presentation of other current assets and assets held for sale at September 30, 2016 has been changed to conform to the current year presentation.

We have condensed or omitted certain notes and other information from the interim financial statements presented in this report. Therefore, these interim statements should be read in conjunction with our Fiscal 2016 Form 10-K. The results for the three and nine months ended June 30, 2017 are not necessarily indicative of results that may be expected for the full year.

Note 2.
New Accounting Standards

New Accounting Standards - Recently Issued

In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation: Scope of Modification Accounting”. The amendments in the ASU include guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under ASC 718, “Compensation - Stock Compensation” and require entities to account for the effects of a modification unless all of the following conditions are met: (a) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or value using an alternative measurement method) of the original award immediately before the original award is modified; (b) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (c) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. These provisions are effective for fiscal years beginning after December 15, 2017 (October 1, 2018 for us), including interim periods within those fiscal years, and should be applied prospectively. Early adoption is permitted. We are currently evaluating the impact of this ASU.

In March 2017, the FASB issued ASU 2017-07, “Compensation: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”. The guidance in this update requires that an employer disaggregate the service cost component from the other components of net benefit cost. Non-service cost components of net periodic pension cost are required

11

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


to be presented in the income statement separately from the service cost component and outside the subtotal of operating income. The amendments in the update also allow only the service cost component to be eligible for capitalization for internally developed capital projects. The amendments in this update are effective for annual periods beginning after December 15, 2017 (October 1, 2018 for us), including interim periods within those annual periods. Early adoption is permitted. The guidance on the presentation of the components of net periodic benefit cost in the income statement will be applied retrospectively. The guidance limiting the capitalization of net periodic benefit cost in assets to the service cost component will be applied prospectively. The guidance includes a practical expedient that permits us to estimate amounts for comparative periods using the information previously disclosed in our pension and other postretirement plan footnote. We are currently evaluating the impact of this ASU.

In February 2017, the FASB issued ASU 2017-05, “Other Income: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets”. The ASU provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. Specifically, the ASU clarifies the scope of an “in substance nonfinancial asset”, clarifies the treatment of partial sales of nonfinancial assets and clarifies guidance on accounting for contributions of nonfinancial assets to joint ventures and equity method investees. The amendments in this update are effective for annual periods beginning after December 15, 2017 (October 1, 2018 for us) including interim reporting periods within those annual reporting periods. Early adoption is permitted. The ASU may be applied by either a full or modified retrospective approach. We are currently evaluating the impact of this ASU.

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment”, which amends the guidance in ASC 350, “Intangibles-Goodwill and Other”. The ASU eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The ASU is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019 (October 1, 2020 for us). Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The ASU will be applied prospectively. We currently do not expect that the adoption of these provisions will have a material effect on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business”, which amends the guidance in ASC 805, “Business Combinations”. The ASU changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. Under the new guidance, an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. If it is not met, the entity then evaluates whether the set meets the requirements that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The ASU defines an output as “the result of inputs and processes applied to those inputs that provide goods or services to customers, investment income (such as dividends or interest), or other revenues.” The ASU is effective for annual reporting periods beginning after December 15, 2017 (October 1, 2018 for us), including interim periods within those annual periods, and early adoption is permitted. The ASU will be applied prospectively to any transactions occurring within the period of adoption. We are currently evaluating the impact of these provisions.

In November 2016, the FASB issued ASU 2016-18, “Restricted Cash”, which amends the guidance in ASC 230, “Statement of Cash Flows”. The new ASU clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. The new guidance will require entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash, and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet. This reconciliation can be prepared either on the face of the statement of cash flows or in the notes to the financial statements. These provisions are effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2017 (October 1, 2018 for us), applied retrospectively for each period presented. Early adoption is permitted. We are currently evaluating the impact of these provisions.

In October 2016, the FASB issued ASU 2016-17, “Interests Held through Related Parties That Are under Common Control”, which amends certain provisions of ASC 810, “Consolidation”. The ASU amends the consolidation requirements that apply to a single decision maker’s evaluation of interests held through related parties that are under common control when it is determining whether it is the primary beneficiary of a variable interest entity. Under the ASU, a reporting entity considers its indirect economic interests in a variable interest entity held through related parties that are under common control on a proportionate basis, in a manner consistent with its consideration of its indirect economic interests held through related parties that are not under common control. These provisions are effective for annual periods, and for interim periods within those annual periods, beginning on or after December 15, 2016 (October 1, 2017 for us). We currently do not expect that the adoption of these provisions will have a material effect on our consolidated financial statements.

12

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)



In October 2016, the FASB issued ASU 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory”, which requires companies to recognize the income tax effects of intercompany sales and transfers of assets other than inventory (e.g., intangible assets) in the period in which the transfer occurs. Current guidance requires companies to defer the income tax effects of intercompany transfers of assets until the asset has been sold to an outside party or otherwise recognized through use. The new guidance will require companies to defer the income tax effects only of intercompany transfers of inventory. The ASU is effective for annual reporting periods beginning after December 15, 2017 (October 1, 2018 for us), including interim periods within those annual periods. The guidance requires companies to apply a modified retrospective approach with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. Early adoption is permitted. We currently do not expect that the adoption of these provisions will have a material effect on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15 “Classification of Certain Cash Receipts and Cash Payments”, which amends the guidance in ASC 230, “Statement of Cash Flows”. The ASU clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows for the following transactions: debt prepayment or extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance, distributions received from equity method investees and beneficial interest in securitization transactions. The ASU also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The guidance requires retrospective adoption and is effective for fiscal years beginning after December 15, 2017 (October 1, 2018 for us), including interim periods within those fiscal years. Early adoption is permitted and an entity that elects early adoption must adopt all of the amendments in the period of adoption. We are currently evaluating the impact of these provisions.

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit losses: Measurement of Credit Losses on Financial Instruments”, which amends certain provisions of ASC 326, “Financial Instruments-Credit Loss”. The ASU changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held to maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. For available for sale debt securities with unrealized losses, entities will be required to measure credit losses in a manner similar to what they do today, except that losses will be recognized as allowances rather than reductions in the amortized cost of the securities. Additionally, entities will have to disclose significantly more information, including information used to track credit quality by year or origination for most financing receivables. The ASU is effective for annual reporting periods beginning after December 15, 2019 (October 1, 2020 for us), including interim periods within those annual periods, and will be applied as a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period for which the guidance is effective. We currently do not expect that the adoption of these provisions will have a material effect on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09 “Compensation - Stock Compensation: Improvements To Employee Share Based Payment Accounting”, which amends certain provisions of ASC 718. The ASU will require all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also will allow an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The provisions are effective for fiscal years beginning after December 15, 2016 (October 1, 2017 for us), including interim periods within those fiscal years. Based on our current stock compensation awards, the adoption is currently not expected to have a material effect on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-07 “Investments - Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting”, which amends certain provisions of ASC 323 “Investments-Equity Method and Joint Ventures”. The ASU eliminates the requirement that an investor retrospectively apply equity method accounting when an investment that it had accounted for by another method initially qualifies for the equity method. The guidance will be applied prospectively and is effective for fiscal years beginning after December 15, 2016 (October 1, 2017 for us), including interim periods within those fiscal years. We currently do not expect that the adoption of these provisions will have a material effect on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-05 “Derivatives and Hedging - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships”, which amends certain provisions of ASC 815 “Derivatives and Hedging”. The ASU clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument under ASC 815 does not, in and of itself, require de-designation of the instrument if all other hedge criteria continue to be met. These provisions are effective for fiscal years beginning after December 15, 2016 (October 1, 2017 for us), including interim periods within those fiscal years, and can be adopted using a prospective or modified retrospective approach. Early adoption is permitted. We currently do not expect that these provisions will have a material effect on our consolidated financial statements.

13

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)



In February 2016, the FASB issued ASU 2016-02 “Leases”, which is codified in ASC 842 “Leases” and supersedes current lease guidance in ASC 840. These provisions require lessees to put a right-of-use asset and lease liability on their balance sheet for operating and financing leases that have a term of more than one year. Expense will be recognized in the income statement similar to current accounting guidance. For lessors, the ASU modifies the classification criteria and the accounting for sales-type and direct financing leases. Entities will need to disclose qualitative and quantitative information about their leases, including characteristics and amounts recognized in the financial statements. These provisions are effective for fiscal years beginning after December 15, 2018 (October 1, 2019 for us), including interim periods within those fiscal years. Early adoption is permitted. Entities are required to use a modified retrospective approach upon adoption to recognize and measure leases at the beginning of the earliest comparative period presented in the financial statements. We have not completed our assessment. We currently expect that the adoption of ASC 842 as of October 1, 2019 will result in recording additional assets and liabilities not previously reflected on our consolidated balance sheets, but we do not expect the adoption to have a significant impact on the recognition, measurement, or presentation of lease expenses within the consolidated statements of operations or the consolidated statements of cash flows.

In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory”, which amends certain provisions of ASC 330 “Inventory”. The ASU requires inventory to be measured at the lower of cost and net realizable value. These provisions do not apply to inventory that is measured using LIFO or the retail inventory method. These provisions apply to all other inventory, which includes inventory that is measured using FIFO or average cost. These provisions are effective for fiscal years beginning after December 15, 2016 (October 1, 2017 for us), including interim periods within those fiscal years, applied prospectively. Early adoption is permitted as of the beginning of an interim or annual reporting period. Given that the majority of our inventory is measured using LIFO, we currently do not expect that the adoption of these provisions will have a material effect on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09 which is codified in ASC 606 “Revenue from Contracts with Customers” and supersedes both the revenue recognition requirement to ASC 605 “Revenue Recognition” and most industry-specific guidance. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the five steps set forth in ASC 606. An entity must also disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date,” which deferred the effective date of ASU 2014-09 by one year. Therefore, these provisions are effective for annual reporting periods beginning after December 15, 2017 (October 1, 2018 for us), including interim periods within that annual period, and can be applied using a full retrospective or modified retrospective approach. The FASB has clarified this guidance in various updates (ASU 2016-08, ASU 2016-12 and ASU 2016-20) during 2015 and 2016, all of which have the same effective date as the original guidance. We are evaluating the impact of these provisions. We will adopt the revenue standard as of October 1, 2018 and currently expect to use the modified retrospective approach. We manufacture certain products that have no alternative use to us (since such products are made to specific customer orders), and we believe for certain customers we have a legally enforceable right to payment for performance completed to date on these manufactured products including a reasonable profit. For those manufactured products that meet these two criteria, we will recognize revenue “over time” upon the adoption of ASC 606. This could result in (a) revenue recognition prior to the date of shipment or title transfer for these products and (b) an increase in unbilled receivables balances and a reduction in finished goods inventory balances on our balance sheet from historic and current levels. We are continuing to evaluate the impact of the provisions of the new revenue standard on the Company's financial position, results of operations and cash flows.


14

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


Note 3.
Equity and Other Comprehensive Income (Loss)

Equity

The following is a summary of the changes in total equity for the nine months ended June 30, 2017 (in millions):
 
WestRock
Company
Stockholders’
Equity
 
Noncontrolling (1)
Interests
 
Total
Equity
Balance at September 30, 2016
$
9,728.8

 
$
101.2

 
$
9,830.0

Net income (loss) attributable to common stockholders
512.1

 
(10.8
)
 
501.3

Other comprehensive income, net of tax
83.0

 

 
83.0

Income tax benefit from share-based plans
1.0

 

 
1.0

Compensation expense under share-based plans
52.8

 

 
52.8

Cash dividends declared (per share - $1.20) (2)
(304.5
)
 

 
(304.5
)
Distributions and adjustments to noncontrolling interests

 
(42.8
)
 
(42.8
)
Issuance of common stock, net of stock received for minimum tax withholdings (3)
161.3

 

 
161.3

Fair value of share-based awards issued in acquisition
1.9

 

 
1.9

Purchases of common stock
(93.0
)
 

 
(93.0
)
Separation of Specialty Chemicals business
5.6

 

 
5.6

Balance at June 30, 2017
$
10,149.0

 
$
47.6

 
$
10,196.6


(1) 
Excludes amounts related to contingently redeemable noncontrolling interests, which are separately classified outside of permanent equity in the mezzanine section of the Condensed Consolidated Balance Sheets.
(2) 
Includes cash dividends paid, and dividends declared but unpaid, related to the shares reserved but unissued to satisfy Smurfit-Stone bankruptcy claims.
(3) 
Includes the issuance of approximately 2.4 million shares of Common Stock valued at $136.1 million in connection with the U.S. Corrugated Acquisition.

Stock Repurchase Program

In July 2015, our board of directors authorized a repurchase program of up to 40.0 million shares of Common Stock, representing approximately 15% of our outstanding Common Stock as of July 1, 2015. The shares of Common Stock may be repurchased over an indefinite period of time at the discretion of management. Pursuant to the program, in the nine months ended June 30, 2017, we repurchased approximately 1.8 million shares of Common Stock for an aggregate cost of $93.0 million. As of June 30, 2017, we had approximately 24.7 million shares of Common Stock available for repurchase under the program.


15

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


Accumulated Other Comprehensive Loss

The tables below summarize the changes in accumulated other comprehensive loss, net of tax, by component for the nine months ended June 30, 2017 and June 30, 2016 (in millions):

 
Cash Flow Hedges
 
Defined Benefit Pension and Postretirement Plans
 
Foreign Currency Items
 
Total (1)
Balance at September 30, 2016
$
(0.2
)
 
$
(523.8
)
 
$
(102.4
)
 
$
(626.4
)
Other comprehensive (loss) income before reclassifications
(0.4
)
 
19.7

 
4.7

 
24.0

Amounts reclassified from accumulated other comprehensive loss (income)
(0.1
)
 
29.4

 

 
29.3

Sale of HH&B

 
2.9

 
26.8

 
29.7

Net current period other comprehensive (loss) income
(0.5
)
 
52.0

 
31.5

 
83.0

Balance at June 30, 2017
$
(0.7
)
 
$
(471.8
)
 
$
(70.9
)
 
$
(543.4
)

(1)  
All amounts are net of tax and noncontrolling interests.

 
Cash Flow Hedges
 
Defined Benefit Pension and Postretirement Plans
 
Foreign Currency Items
 
Total (1)
Balance at September 30, 2015
$
(1.4
)
 
$
(540.7
)
 
$
(238.1
)
 
$
(780.2
)
Other comprehensive (loss) income before reclassifications
(0.5
)
 
1.4

 
133.4

 
134.3

Amounts reclassified from accumulated other comprehensive loss
1.0

 
5.4

 
20.2

 
26.6

Separation of Specialty Chemicals business
0.4

 
1.9

 
5.6

 
7.9

Net current period other comprehensive income
0.9

 
8.7

 
159.2

 
168.8

Balance at June 30, 2016
$
(0.5
)
 
$
(532.0
)
 
$
(78.9
)
 
$
(611.4
)

(1)     All amounts are net of tax and noncontrolling interests.

The net of tax amounts were determined using the jurisdictional statutory rates, and reflect effective tax rates averaging 37% to 38% for the nine months ended June 30, 2017 and 34% to 35% for the nine months ended June 30, 2016. Although we are impacted by a number of currencies, foreign currency translation gains recorded in accumulated other comprehensive loss for the nine months ended June 30, 2017 were primarily due to the HH&B Sale as well as gains in the Canadian dollar and Mexican peso, partially offset by changes in the Yen and Brazilian Real exchange rates, each against the U.S. dollar. Foreign currency translation gains recorded in accumulated other comprehensive loss for the nine months ended June 30, 2016 were primarily due to the changes in the Brazilian Real and Canadian dollar, both against the U.S. dollar. For the nine months ended June 30, 2017, we recorded defined benefit net actuarial gains of $19.7 million, net of $15.1 million of deferred income tax expense, in other comprehensive (loss) income, primarily due to the remeasurement of the Plan at February 28, 2017. For the nine months ended June 30, 2017, amounts reclassified from accumulated other comprehensive loss totaled $59.0 million, net of deferred income tax of $17.8 million, primarily related to the HH&B Sale and pension settlement accounting in the Plan in February 2017. For the nine months ended June 30, 2016, we recorded defined benefit net actuarial gains of $1.4 million, net of tax of $0.8 million, in other comprehensive income (loss), primarily due to the partial settlement and curtailment of certain defined benefit plans.


16

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


The following table summarizes the reclassifications out of accumulated other comprehensive loss by component (in millions):

 
Three Months Ended
 
Three Months Ended
 
June 30, 2017
 
June 30, 2016
 
Pretax
 
Tax
 
Net of Tax
 
Pretax
 
Tax
 
Net of Tax
Amortization of defined benefit pension and postretirement items (1)
 
 
 
 
 
 
 
 
 
 
 
Actuarial losses (2)
$
(4.8
)
 
$
1.5

 
$
(3.3
)
 
$
(1.9
)
 
$
0.6

 
$
(1.3
)
Prior service credits (costs) (2)
0.2

 
(0.1
)
 
0.1

 
(0.4
)
 
0.3

 
(0.1
)
Sale of HH&B (3)
(4.2
)
 
1.3

 
(2.9
)
 

 

 

Subtotal defined benefit plans
(8.8
)
 
2.7

 
(6.1
)
 
(2.3
)
 
0.9

 
(1.4
)
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
 
 
 
 
 
 
 
 
 
 
Sale of HH&B (3)
(26.8
)
 

 
(26.8
)
 

 

 

Sale of foreign subsidiary (4)

 

 

 
(20.2
)
 

 
(20.2
)
Subtotal foreign currency translation adjustments
(26.8
)
 

 
(26.8
)
 
(20.2
)
 

 
(20.2
)
Derivative Instruments (1)

 
 
 
 
 
 
 
 
 
 
 
Commodity cash flow hedges (5)


 

 

 
(0.3
)
 

 
(0.3
)
Foreign currency cash flow hedges (6)

0.3

 
(0.2
)
 
0.1

 
(0.5
)
 
0.2

 
(0.3
)
Subtotal derivative instruments


0.3

 
(0.2
)
 
0.1

 
(0.8
)
 
0.2

 
(0.6
)
 
 
 
 
 
 
 
 
 
 
 
 
Total reclassifications for the period
$
(35.3
)
 
$
2.5

 
$
(32.8
)
 
$
(23.3
)
 
$
1.1

 
$
(22.2
)

(1)  
Amounts in parentheses indicate charges to earnings. Amounts pertaining to noncontrolling interests are excluded.
(2) 
These accumulated other comprehensive income components are included in the computation of net periodic pension cost. See “Note 14. Retirement Plans” for additional details.
(3) 
Included in gain on sale of HH&B.
(4) 
Included in interest income and other income (expense), net.
(5) 
These accumulated other comprehensive income components are included in cost of goods sold.
(6) 
These accumulated other comprehensive income components are included in net sales.



17

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


The following table summarizes the reclassifications out of accumulated other comprehensive loss by component (in millions):

 
Nine Months Ended
 
Nine Months Ended
 
June 30, 2017
 
June 30, 2016
 
Pretax
 
Tax
 
Net of Tax
 
Pretax
 
Tax
 
Net of Tax
Amortization of defined benefit pension and postretirement items (1)
 
 
 
 
 
 
 
 
 
 
 
Actuarial losses (2)
$
(46.7
)
 
$
16.9

 
$
(29.8
)
 
$
(6.5
)
 
$
1.9

 
$
(4.6
)
Prior service credits (costs) (2)
0.7

 
(0.3
)
 
0.4

 
(1.3
)
 
0.5

 
(0.8
)
Sale of HH&B (3)
(4.2
)
 
1.3

 
(2.9
)
 

 

 

Subtotal defined benefit plans
(50.2
)
 
17.9

 
(32.3
)
 
(7.8
)
 
2.4

 
(5.4
)
Foreign currency translation adjustments
 
 
 
 
 
 
 
 
 
 
 
Sale of HH&B (3)
(26.8
)
 

 
(26.8
)
 

 

 

Sale of foreign subsidiary (4)

 

 

 
(20.2
)
 

 
(20.2
)
Subtotal foreign currency translation adjustments
(26.8
)
 

 
(26.8
)
 
(20.2
)
 

 
(20.2
)
Derivative Instruments (1)

 
 
 
 
 
 
 
 
 
 
 
Commodity cash flow hedges (5)


 

 

 
(1.4
)
 
0.5

 
(0.9
)
Foreign currency cash flow hedges (6)

0.2

 
(0.1
)
 
0.1

 
(0.2
)
 
0.1

 
(0.1
)
Subtotal derivative instruments


0.2

 
(0.1
)
 
0.1

 
(1.6
)
 
0.6

 
(1.0
)
Total reclassifications for the period
$
(76.8
)
 
$
17.8

 
$
(59.0
)
 
$
(29.6
)
 
$
3.0

 
$
(26.6
)

(1) 
Amounts in parentheses indicate charges to earnings. Amounts pertaining to noncontrolling interests are excluded.
(2) 
These accumulated other comprehensive income components are included in the computation of net periodic pension cost. See “Note 14. Retirement Plans” for additional details.
(3) 
Included in gain on sale of HH&B.
(4) 
Included in interest income and other income (expense), net.
(5) 
These accumulated other comprehensive income components are included in cost of goods sold.
(6) 
These accumulated other comprehensive income components are included in net sales.


Note 4.
Earnings per Share

Restricted stock awards we grant to non-employee directors are considered participating securities as they receive non-forfeitable rights to dividends at the same rate as Common Stock. As participating securities, we include these instruments in the earnings allocation in computing earnings per share under the two-class method described in ASC 260 “Earnings per Share”. The following table sets forth the computation of basic and diluted earnings per share under the two-class method (in millions, except per share data):
 

18

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


 
Three Months Ended
 
Nine Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Basic earnings (loss) per share:
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Income from continuing operations

$
326.6

 
$
152.4

 
$
503.3

 
$
241.2

Less: Net loss (income) from continuing operations attributable to noncontrolling interest
1.5

 
(0.4
)
 
8.8

 
(1.8
)
Income available to common stockholders, before discontinued operations

328.1

 
152.0

 
512.1

 
239.4

Less: Distributed and undistributed income available to participating securities
(0.1
)
 

 
(0.1
)
 

Distributed and undistributed income attributable to common stockholders, before discontinued operations
328.0

 
152.0

 
512.0

 
239.4

Loss from discontinued operations (1)

 
(59.7
)
 

 
(543.7
)
Net income (loss) attributable to common stockholders
$
328.0

 
$
92.3

 
$
512.0

 
$
(304.3
)
Denominator:
 
 
 
 
 
 
 
Basic weighted average shares outstanding
252.1

 
252.7

 
251.5

 
254.8

 
 
 
 
 
 
 
 
Basic earnings per share from continuing operations
$
1.30

 
$
0.60

 
$
2.04

 
$
0.94

Basic loss per share from discontinued operations

 
(0.23
)
 

 
(2.13
)
Basic earnings (loss) per share attributable to common stockholders
$
1.30

 
$
0.37

 
$
2.04

 
$
(1.19
)
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share:
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Income from continuing operations

$
326.6

 
$
152.4

 
$
503.3

 
$
241.2

Less: Net loss (income) from continuing operations attributable to noncontrolling interest
1.5

 
(0.4
)
 
8.8

 
(1.8
)
Income available to common stockholders, before discontinued operations

328.1

 
152.0

 
512.1

 
239.4

Less: Distributed and undistributed income available to participating securities
(0.1
)
 

 
(0.1
)
 

Distributed and undistributed income attributable to common stockholders, before discontinued operations
328.0

 
152.0

 
512.0

 
239.4

Loss from discontinued operations (1)

 
(59.7
)
 

 
(543.7
)
Net income (loss) attributable to common stockholders
$
328.0

 
$
92.3

 
$
512.0

 
$
(304.3
)
Denominator:
 
 
 
 
 
 
 
Basic weighted average shares outstanding
252.1

 
252.7

 
251.5

 
254.8

Effect of dilutive stock options and non-participating securities
3.2

 
3.5

 
3.5

 
3.8

Diluted weighted average shares outstanding
255.3

 
256.2

 
255.0

 
258.6

 
 
 
 
 
 
 
 
Diluted earnings per share from continuing operations
$
1.29

 
$
0.59

 
$
2.01

 
$
0.93

Diluted loss per share from discontinued operations

 
(0.23
)
 

 
(2.11
)
Diluted earnings (loss) per share attributable to common stockholders
$
1.29

 
$
0.36

 
$
2.01

 
$
(1.18
)

(1)  
Net of income attributable to noncontrolling interests of discontinued operations of $1.0 million and $4.3 million for the three and nine months ended June 30, 2016, respectively.

Weighted average shares include approximately 0.2 million and 0.3 million of reserved, but unissued, shares at June 30, 2017 and June 30, 2016, respectively. These reserved shares will be distributed as claims are liquidated or resolved in accordance with the Smurfit-Stone Plan of Reorganization and Confirmation Order.

19

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)



Stock options and restricted stock in the amount of 0.6 million and 0.6 million common shares in the three and nine months ended June 30, 2017, respectively, were not included in computing diluted earnings per share because the effect would have been antidilutive. Stock options and restricted stock in the amount of 1.9 million and 1.8 million common shares in the three and nine months ended June 30, 2016, respectively, were not included in computing diluted earnings per share because the effect would have been antidilutive.

Note 5.
Acquisitions and Investment

MPS Acquisition

On June 6, 2017, we completed the acquisition of MPS in a stock purchase. MPS is a global provider of print-based specialty packaging solutions and its differentiated product offering includes premium folding cartons, inserts, labels and rigid packaging. We acquired the outstanding shares of MPS for $18.00 per share in cash and the assumption of debt.

In connection with the MPS Acquisition, we paid cash of $1,351.1 million, net of cash received of $47.5 million. The purchase consideration included the assumption of $929.1 million of debt and approximately $1.9 million related to MPS equity awards that were replaced with WestRock equity awards with identical terms for the pre-acquisition service. The amount related to post-acquisition service is being expensed over the remaining service period of the awards. For additional information on the converted awards see “Note 15. Stock-Based Compensation”. We have included the financial results of MPS since the date of the acquisition in our Consumer Packaging segment.
 
The preliminary allocation of consideration primarily included $1,013.8 million of intangible assets, $893.2 million of goodwill, $495.1 million of property, plant and equipment and $1,564.6 million of liabilities and noncontrolling interests, including debt and deferred income taxes. The fair value assigned to goodwill is primarily attributable to buyer-specific synergies expected to arise after the acquisition (e.g., enhanced reach of the combined organization and other synergies), the assembled work force, as well as due to establishing deferred taxes for the difference between book and tax basis of the assets and liabilities acquired. The goodwill and intangibles are not amortizable for income tax purposes. We are in the process of reviewing the estimated fair values of all assets acquired and liabilities assumed, including, among other things, obtaining final third-party valuations of certain tangible and intangible assets as well as the fair value of certain contracts and the determination of certain tax balances; thus, the allocation of the purchase price is preliminary and subject to revision.

The following table summarizes the weighted average life and the preliminary allocation to intangible assets recognized in the MPS Acquisition, excluding goodwill (in millions):
 
 
Weighted Avg. Life
 
Amounts Recognized as of the Acquisition Date
Customer relationships
 
14.6
 
$
996.1

Trademarks and tradenames
 
3.0
 
15.2

Photo library
 
10.0
 
2.5

Total
 
14.4
 
$
1,013.8


None of the intangibles has significant residual value. We are amortizing the customer relationship intangibles over estimated useful lives ranging from 13.5 to 16 years based on a straight-line basis because the amortization pattern was not reliably determinable.

U.S. Corrugated Acquisition

On June 9, 2017, we completed the U.S. Corrugated Acquisition in a stock purchase. We acquired five corrugated converting facilities in Ohio, Pennsylvania and Louisiana that provide a comprehensive suite of products and services to customers in a variety of end markets, including food & beverage, pharmaceuticals and consumer electronics. The transaction provides the opportunity to increase the vertical integration of our Corrugated Packaging segment by approximately 105,000 tons of containerboard annually through the acquired facilities and another 50,000 tons under a long-term supply contract with another company owned by the seller.

The purchase consideration for the U.S. Corrugated Acquisition was $193.7 million, net of cash received of $1.4 million and an unreceived working capital settlement of $3.4 million. The consideration included the issuance of 2.4 million shares of Common

20

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


Stock valued at $136.1 million. We have included the financial results of the acquired assets since the date of the acquisition in our Corrugated Packaging segment.

The preliminary allocation of consideration primarily included $76.9 million of customer relationship intangible assets, $104.1 million of goodwill, $32.4 million of property, plant and equipment and $50.6 million of liabilities, including deferred income taxes. We are amortizing the customer relationship intangibles over 7.5 years based on a straight-line basis because the amortization pattern was not reliably determinable. The fair value assigned to goodwill is primarily attributable to buyer-specific synergies expected to arise after the acquisition (e.g., enhanced reach of the combined organization and other synergies), and the assembled work force, as well as due to establishing deferred taxes for the difference between book and tax basis of the assets and liabilities acquired. The goodwill and intangibles are not amortizable for income tax purposes. We are in the process of reviewing the estimated fair values of all assets acquired and liabilities assumed, including, among other things, obtaining final third-party valuations of certain tangible and intangible assets as well as the fair value of certain contracts and the determination of certain tax balances; thus, the allocation of the purchase price is preliminary and subject to revision.

Star Pizza Acquisition

On March 13, 2017, we completed the purchase of certain assets and liabilities of Star Pizza Inc., a privately owned and operated corrugated pizza box distributor. The transaction provides us with a leadership position in the fast growing small-run pizza box market and increases our vertical integration. The purchase price was $34.7 million, net of a preliminary unreceived $0.6 million working capital settlement. We have included the financial results of the acquired assets since the date of the acquisition in our Corrugated Packaging segment.

The preliminary purchase price allocation for the acquisition primarily included $24.8 million of customer relationship intangible assets and $2.3 million of goodwill. We are amortizing the customer relationship intangibles over 10 years based on a straight-line basis because the amortization pattern was not reliably determinable. The fair value assigned to goodwill is primarily attributable to buyer-specific synergies expected to arise after the acquisition (e.g., enhanced reach of the combined organization and other synergies), and the assembled work force. We expect the goodwill and intangibles to be amortizable for income tax purposes. We are in the process of reviewing the estimated fair values of all assets acquired and liabilities assumed; thus, the allocation of the purchase price is preliminary and subject to revision.

Grupo Gondi Investment

On April 1, 2016, we completed the formation of a joint venture with Grupo Gondi in Mexico. We contributed $175.0 million in cash and the stock of an entity that owns three corrugated packaging facilities in Mexico in return for a 25.0% equity participation in the joint venture together with future put and call rights. The investment was valued at approximately $0.3 billion. The joint venture operates paper machines, corrugated packaging and high graphic folding carton facilities across various production sites. The majority equity holders manage the joint venture and we provide technical and commercial resources and supply certain paperboard to the joint venture. We believe the joint venture will help grow our presence in the attractive Mexican market. As a result of the transaction, we recorded a pre-tax non-cash gain of $12.1 million included in “Interest income and other income (expense), net” on our Condensed Consolidated Statements of Operations in the third quarter of fiscal 2016. The transaction includes future put and call rights with respect to the respective parties’ ownership interest in the joint venture. We have included the financial results of the joint venture since the date of formation in our Corrugated Packaging segment, and are accounting for the investment under the equity method. In the third quarter of fiscal 2017, the joint venture entity purchased shares from a minority partner. As a result, our equity participation in the joint venture increased to approximately 27.0%. The transaction continues to include future put and call rights with respect to the respective parties’ ownership interest in the joint venture.

Packaging Acquisition

On January 19, 2016, we completed a stock purchase of certain legal entities formerly owned by Cenveo Inc. The entities acquired provide value-added folding carton and litho-laminated display packaging solutions. The purchase price was $94.1 million, net of cash received of $1.7 million, a working capital settlement and a $3.5 million escrow receipt in the first quarter of fiscal 2017. The transaction is subject to an election under Section 338(h)(10) of the Code that increases the U.S. tax basis in the acquired U.S. entities. We believe the transaction has provided us with attractive and complementary customers, markets and facilities. We have included the financial results of the acquired entities since the date of the acquisition in our Consumer Packaging segment.

The purchase price allocation for the acquisition primarily included $55.0 million of property, plant and equipment, $10.5 million of customer relationship intangible assets, $9.3 million of goodwill and $25.8 million of liabilities, including $1.3 million of debt. We are amortizing the customer relationship intangibles over estimated useful lives ranging from 9 to 15 years based on a straight-line basis because the amortization pattern was not reliably determinable. The fair value assigned to goodwill is primarily

21

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


attributable to buyer-specific synergies expected to arise after the acquisition (e.g., enhanced reach of the combined organization and other synergies), and the assembled work force. The goodwill and intangibles of the U.S. entities are amortizable for income tax purposes.

SP Fiber

On October 1, 2015, we acquired SP Fiber in a stock purchase. The transaction included the acquisition of mills located in Dublin, GA and Newberg, OR, which produce lightweight recycled containerboard and kraft and bag paper. The Newberg mill also produced newsprint. As part of the transaction, we also acquired SP Fiber's 48% interest in GPS. GPS is a joint venture providing steam to the Dublin mill and electricity to Georgia Power. The purchase price was $278.8 million, net of cash received of $9.2 million and a working capital settlement. In addition, we paid $36.5 million for debt owed by GPS and thereby own the majority of the debt issued by GPS.

The Dublin mill has helped balance the fiber mix of our mill system, including our ability to serve the increasing demand for lighter weight containerboard, and the addition of kraft and bag paper has diversified our product offering. Subsequent to the transaction, we announced the permanent closure of the Newberg mill due to the decline in market conditions of the newsprint business and our need to balance supply and demand in our containerboard system. We determined GPS should be consolidated as a variable interest entity under ASC 810 “Consolidation”. Our evaluation concluded that WestRock is the primary beneficiary of GPS as WestRock has both the power and benefits as defined by ASC 810. We have included the financial results of SP Fiber and GPS since the date of the acquisition in our Corrugated Packaging segment.
 
The purchase price allocation for the acquisition primarily included $324.8 million of property, plant and equipment, $13.5 million of customer relationship intangible assets, $57.3 million of goodwill and $150.3 million of liabilities and noncontrolling interests, including $13.7 million of debt primarily owed by GPS to third parties. We are amortizing the customer relationship intangibles over 20 years based on a straight-line basis because the amortization pattern was not reliably determinable. The fair value assigned to goodwill is primarily attributable to buyer-specific synergies expected to arise after the acquisition (e.g., enhanced reach of the combined organization and other synergies), the assembled work force of SP Fiber as well as due to establishing deferred taxes for the difference between the book to tax basis of the assets and liabilities acquired. The goodwill and intangibles are not amortizable for income tax purposes.

Note 6.
Discontinued Operations

On May 15, 2016, WestRock completed the Separation. Since the Separation, we have not beneficially owned any shares of Ingevity common stock and Ingevity has been an independent public company trading under the symbol “NGVT” on the New York Stock Exchange. We disposed of the former Specialty Chemicals segment in its entirety and ceased to consolidate its assets, liabilities and results of operations. Accordingly, we have presented the financial position and results of operations of the former Specialty Chemicals segment as discontinued operations in the accompanying condensed consolidated financial statements for all periods presented.

In connection with the Separation, we and Ingevity entered into a separation and distribution agreement as well as various other agreements that provide a framework for the relationships between the parties going forward, including among others a tax matters agreement, a lease and ground service agreement with respect to our Covington, Virginia facility, an intellectual property agreement, a crude tall oil and black liquor soap skimming supply agreement, a trust agreement, an employee matters agreement and a transition services agreement. These agreements provided for the allocation between us and Ingevity of assets, employees, liabilities and obligations attributable to periods prior to, at and after the Separation and govern certain relationships between us and Ingevity after the Separation.

Prior to the Separation, Ingevity, then a wholly-owned subsidiary of WestRock, borrowed $500.0 million in contemplation of the Separation. In addition, Ingevity assumed an $80.0 million, 7.67% capital lease obligation due January 15, 2027 owed to the City of Wickliffe, KY. In contemplation of the Separation, Ingevity also funded a trust in the amount of $68.9 million to secure the balloon principal payment of that capital lease upon the lease’s maturity. We remain a co-obligor on the capital lease obligation; therefore, the capital lease assumed by Ingevity remains recorded in our Condensed Consolidated Financial Statements in long-term debt. At the time of the Separation, we recorded a $108.2 million long-term asset for the estimated fair value of the future principal and interest payments on the capital lease obligation assumed by Ingevity. The value of the long-term asset and the long-term debt under the lease will reduce over the life of the lease using the effective interest method. The $500.0 million of debt and the $68.9 million in the trust were assumed by Ingevity, and were removed from our Condensed Consolidated Financial Statements as part of our discontinued operations reporting.


22

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


The following table presents the financial results of Specialty Chemicals’ discontinued operations (in millions):
 
Three Months Ended
 
Nine Months Ended
 
June 30, 2016
 
June 30, 2016
Net sales
$
120.0

 
$
533.7

Cost of goods sold
83.8

 
387.5

Gross Profit
36.2

 
146.2

Selling, general and administrative, excluding intangible amortization
11.8

 
65.6

Selling, general and administrative intangible amortization
5.9

 
28.8

Restructuring and other costs, net
22.5

 
50.9

Impairment of Specialty Chemicals goodwill and intangibles
101.1

 
579.4

Operating loss
(105.1
)
 
(578.5
)
Interest income (expense) and other income (expense), net
0.2

 
0.1

Loss from discontinued operations before income taxes
(104.9
)
 
(578.4
)
Income tax benefit
46.2

 
39.0

Loss from discontinued operations
$
(58.7
)
 
$
(539.4
)

Restructuring and other costs, net are primarily associated with costs incurred to support the Separation and consist primarily of advisory, legal, accounting and other professional fees. Additionally, restructuring and other costs, net include $10.0 million of costs associated with the closure of Ingevity’s Duque de Caxias facility in Brazil and other severance and stock-based compensation expenses.

In the first quarter of fiscal 2016, as part of our evaluation of whether events or changes in circumstances had occurred that would indicate whether it was more likely than not that the goodwill of our then-owned Specialty Chemicals reporting unit was impaired, we considered factors such as, but not limited to, macroeconomic conditions, industry and market considerations, and financial performance, including the planned revenue and earnings of the reporting unit. We concluded that an impairment indicator had occurred related to the goodwill of the Specialty Chemicals reporting unit and that the indicator was driven by market factors subsequent to the Combination.

Accordingly, we performed a “Step 1” goodwill impairment test where we updated the discounted cash flow analysis used to determine the reporting unit’s initial fair value on July 1, 2015. We also compared those results to the valuations performed by our investment bankers in connection with the planned separation of the Specialty Chemicals business. Based on the results of the impairment test and analysis, we concluded that the fair value of the Specialty Chemicals reporting unit was less than its carrying amount and performed a “Step 2” goodwill impairment test to determine the amount of impairment loss, if any. As part of the analysis, we determined that the carrying value of the property, plant and equipment and intangibles, all of which have finite lives, on a “held and used” basis did not exceed the estimated undiscounted future cash flows.

In light of changing market conditions, expected revenue and earnings of the reporting unit, lower comparative market valuations for companies in Specialty Chemicals’ peer group and our preliminary “Step 2” test, we concluded that an impairment of the Specialty Chemicals reporting unit was probable and could be reasonably estimated. As a result, we recorded a pre-tax and after-tax non-cash goodwill impairment charge of $478.3 million. This amount is included in the line item “Loss from discontinued operations” in the Condensed Consolidated Statements of Operations. No tax benefit was recorded for the goodwill impairment.

Until the completion of the Separation, GAAP required us to assess impairment of the Specialty Chemicals’ long-lived assets using the “held and used” model which is based on undiscounted future cash flows. Under this model, if the expected cash flows over the life of the primary asset of the reporting unit were in excess of the carrying amount, then there would be no impairment. At the date of the Separation, we assessed Specialty Chemical’s assets for potential impairment using the “held for sale” model. This model compares the fair value of the disposal unit to its carrying value and if the fair value less cost to sell is lower, then an impairment loss would be recorded. At the date of the Separation, we evaluated our intangibles, which consisted predominantly of customer list intangibles for impairment. Our analysis at May 15, 2016, using the income approach (multi-period excess earnings method), indicated that there was a $101.1 million pre-tax non-cash impairment of the Specialty Chemicals customer relationships intangible. The impairment loss was recorded on the Separation and is included as a component of discontinued operations.


23

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


The following table presents the significant non-cash items and capital expenditures for Specialty Chemicals’ that are included in the Condensed Consolidated Statements of Cash Flows (in millions):
 
Nine Months Ended
 
June 30, 2016
Depreciation, depletion and amortization
$
57.2

Impairment of Specialty Chemicals goodwill and intangibles
$
579.4

Capital expenditures
$
43.9


Note 7.
Assets Held For Sale

During the second quarter of fiscal 2017, we committed to a plan to sell HH&B. On January 23, 2017, we announced we had entered into an agreement with certain subsidiaries of Silgan under which Silgan would purchase HH&B for approximately $1.025 billion in cash plus the assumption of approximately $25 million in foreign pension liabilities. Accordingly, in the second quarter of fiscal 2017, all the assets and liabilities of HH&B were reported in the Condensed Consolidated Balance Sheet as assets and liabilities held for sale. We discontinued recording depreciation and amortization while the assets were held for sale. On April 6, 2017, we announced that we had completed the HH&B Sale. We used the proceeds from the sale of the business in connection with the MPS Acquisition. We recorded a pre-tax gain on sale of HH&B of $190.6 million during the third quarter of fiscal 2017.
 
Due to our accelerated monetization strategy, our Land and Development portfolio has met the held for sale criteria and is reflected as assets held for sale. Assets held for sale at June 30, 2017 of $200.7 million include $170.7 million of Land and Development portfolio assets, with the remainder primarily related to closed facilities. As of September 30, 2016, the $52.3 million of assets held for sale were primarily related to assets under contract in our Land and Development segment.

Note 8.
Restructuring and Other Costs, Net

Summary of Restructuring and Other Initiatives

We recorded pre-tax restructuring and other costs, net of $59.4 million and $158.7 million for the three and nine months ended June 30, 2017, respectively, and $43.1 million and $317.0 million for the three and nine months ended June 30, 2016, respectively. These amounts are not comparable since the timing and scope of the individual actions associated with a restructuring, acquisition or integration can vary. The restructuring and other costs, net exclude the Specialty Chemicals costs which are included in discontinued operations. We discuss our restructuring and other costs, net in more detail below and those charged to discontinued operations in “Note 6. Discontinued Operations”.

When we close a facility, if necessary, we recognize an impairment charge primarily to reduce the carrying value of equipment or other property to their estimated fair value less cost to sell, and record charges for severance and other employee related costs. Any subsequent change in fair value less cost to sell prior to disposition is recognized as identified; however, no gain is recognized in excess of the cumulative loss previously recorded. At the time of each announced closure, we generally expect to record future charges for equipment relocation, facility carrying costs, costs to terminate a lease or contract before the end of its term and other employee related costs. Although specific circumstances vary, our strategy has generally been to consolidate our sales and operations into large well-equipped plants that operate at high utilization rates and take advantage of available capacity created by operational excellence initiatives. Therefore, we have transferred a substantial portion of each plant’s assets and production to our other plants. We believe these actions have allowed us to more effectively manage our business.


24

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)


While restructuring costs are not charged to our segments and, therefore, do not reduce segment income, we highlight the segment to which the charges relate. The following table presents a summary of restructuring and other charges, net, related to active restructuring and other initiatives that we incurred during the three and nine months ended June 30, 2017 and June 30, 2016, the cumulative recorded amount since we started the initiative, and our estimate of the total we expect to incur (in millions):

Summary of Restructuring and Other Costs, Net
Segment
 
Period
 
Net Property,
Plant and
Equipment (1)
 
Severance
and Other
Employee
Related
Costs
 
Equipment
and Inventory
Relocation
Costs
 
Facility
Carrying
Costs
 
Other
Costs
 
Total
Corrugated
Packaging (2)
 
Current Qtr.
 
$
0.4

 
$
0.2

 
$
0.3

 
$
1.4

 
$
(0.1
)
 
$
2.2

 
YTD Fiscal 2017
 
(0.9
)
 
(4.5
)
 
1.8

 
4.7

 
0.6

 
1.7

 
Prior Year Qtr.
 
1.4

 
0.4

 

 
3.4

 
0.4

 
5.6

 
YTD Fiscal 2016
 
181.3

 
15.6

 
0.3

 
15.9

 
8.8

 
221.9

 
Cumulative
 
218.7

 
35.3

 
6.4

 
35.7

 
22.3

 
318.4

 
Expected Total
 
218.7

 
36.4

 
7.0

 
37.7

 
22.9

 
322.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Packaging (3)
 
Current Qtr.
 
6.0

 
12.7

 
1.2

 
0.1

 
0.4

 
20.4

 
YTD Fiscal 2017
 
25.7

 
20.7

 
2.2

 
0.1

 
18.3

 
67.0

 
Prior Year Qtr.
 
1.5

 
3.4

 
0.4

 
0.1

 

 
5.4

 
YTD Fiscal 2016
 
(0.5
)
 
4.0

 
0.9

 
0.5

 

 
4.9

 
Cumulative
 
35.0

 
28.7

 
4.3

 
1.8

 
18.8

 
88.6

 
Expected Total
 
35.0

 
28.7

 
4.5

 
2.3

 
18.8

 
89.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Land and Development (4)
 
Current Qtr.
 

 
0.8

 

 

 

 
0.8

 
YTD Fiscal 2017
 

 
2.3

 

 

 

 
2.3

 
Prior Year Qtr.
 

 

 

 

 

 

 
YTD Fiscal 2016
 

 

 

 

 

 

 
Cumulative
 

 
12.9

 

 

 

 
12.9

 
Expected Total
 

 
14.6

 

 

 

 
14.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other (5)
 
Current Qtr.
 

 
0.2

 

 

 
35.8

 
36.0

 
YTD Fiscal 2017
 
0.1

 
0.7

 

 

 
86.9

 
87.7

 
Prior Year Qtr.