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WestRock Co - Quarter Report: 2021 March (Form 10-Q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2021

or

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 001-38736

WestRock Company

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

37-1880617

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1000 Abernathy Road NE, Atlanta, Georgia

 

30328

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (770) 448-2193

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

WRK

New York Stock Exchange

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   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes   No

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.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

Emerging growth company

 

 

 

 

 

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

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 April 23, 2021

Common Stock, $0.01 par value

 

266,116,343

 

 

 

 

 


 

 

 

WESTROCK COMPANY

INDEX

 

 

 

 

Page

PART I

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Statements of Income for the three and six months ended March 31, 2021 and 2020

3

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended March 31, 2021 and 2020

4

 

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2021 and September 30, 2020

5

 

 

 

 

Condensed Consolidated Statements of Equity for the three and six months ended March 31, 2021 and 2020

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2021 and 2020

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

9

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

52

 

 

 

Item 4.

Controls and Procedures

52

 

 

 

PART II

OTHER INFORMATION

54

 

 

 

Item 1.

Legal Proceedings

54

 

 

 

Item 1A.

Risk Factors

54

 

 

 

Item 6.

Exhibits

54

 

 

 

 

Index to Exhibits

55

 

 

2


 

PART I: FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS (UNAUDITED)

WESTROCK COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

(In millions, except per share data)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

4,437.8

 

 

$

4,447.3

 

 

$

8,839.3

 

 

$

8,871.0

 

Cost of goods sold

 

 

3,688.2

 

 

 

3,642.5

 

 

 

7,336.8

 

 

 

7,257.2

 

Gross profit

 

 

749.6

 

 

 

804.8

 

 

 

1,502.5

 

 

 

1,613.8

 

Selling, general and administrative, excluding

   intangible amortization

 

 

458.4

 

 

 

418.6

 

 

 

876.2

 

 

 

844.3

 

Selling, general and administrative intangible

   amortization

 

 

88.6

 

 

 

100.1

 

 

 

180.5

 

 

 

201.9

 

Loss (gain) on disposal of assets

 

 

0.3

 

 

 

(5.6

)

 

 

2.8

 

 

 

(6.9

)

Multiemployer pension withdrawal expense

 

 

 

 

 

0.9

 

 

 

 

 

 

0.9

 

Restructuring and other costs

 

 

5.2

 

 

 

16.4

 

 

 

12.9

 

 

 

46.5

 

Operating profit

 

 

197.1

 

 

 

274.4

 

 

 

430.1

 

 

 

527.1

 

Interest expense, net

 

 

(83.5

)

 

 

(97.3

)

 

 

(177.3

)

 

 

(190.8

)

Loss on extinguishment of debt

 

 

 

 

 

(0.5

)

 

 

(1.1

)

 

 

(0.5

)

Pension and other postretirement non-service income

 

 

35.0

 

 

 

26.1

 

 

 

69.9

 

 

 

52.8

 

Other (expense) income, net

 

 

(13.4

)

 

 

(0.9

)

 

 

7.4

 

 

 

(4.6

)

Equity in income of unconsolidated entities

 

 

9.7

 

 

 

4.9

 

 

 

18.7

 

 

 

8.7

 

Income before income taxes

 

 

144.9

 

 

 

206.7

 

 

 

347.7

 

 

 

392.7

 

Income tax expense

 

 

(30.5

)

 

 

(57.8

)

 

 

(80.8

)

 

 

(104.3

)

Consolidated net income

 

 

114.4

 

 

 

148.9

 

 

 

266.9

 

 

 

288.4

 

Less: Net income attributable to noncontrolling

   interests

 

 

(1.9

)

 

 

(0.8

)

 

 

(2.4

)

 

 

(1.8

)

Net income attributable to common stockholders

 

$

112.5

 

 

$

148.1

 

 

$

264.5

 

 

$

286.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share attributable to common

   stockholders

 

$

0.42

 

 

$

0.57

 

 

$

1.00

 

 

$

1.11

 

Diluted earnings per share attributable to common

   stockholders

 

$

0.42

 

 

$

0.57

 

 

$

0.99

 

 

$

1.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 

264.9

 

 

 

259.0

 

 

 

263.8

 

 

 

258.6

 

Diluted weighted average shares outstanding

 

 

267.0

 

 

 

260.2

 

 

 

265.9

 

 

 

260.1

 

 

 

 

 

 

 

 

 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

3


WESTROCK COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

(In millions)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income

 

$

114.4

 

 

$

148.9

 

 

$

266.9

 

 

$

288.4

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation (loss) gain

 

 

(87.2

)

 

 

(387.5

)

 

 

109.7

 

 

 

(287.1

)

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred loss on cash flow hedges

 

 

 

 

 

(8.9

)

 

 

(0.1

)

 

 

(9.4

)

Reclassification adjustment of net loss on

  cash flow hedges included in earnings

 

 

1.4

 

 

 

2.5

 

 

 

2.9

 

 

 

1.2

 

Defined benefit pension and other postretirement

   benefit plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization and settlement recognition of net

   actuarial loss, included in pension cost

 

 

5.8

 

 

 

8.5

 

 

 

11.4

 

 

 

17.2

 

Amortization and settlement recognition of prior

   service cost, included in pension cost

 

 

1.0

 

 

 

1.0

 

 

 

2.1

 

 

 

1.5

 

Other comprehensive (loss) income, net of tax

 

 

(79.0

)

 

 

(384.4

)

 

 

126.0

 

 

 

(276.6

)

Comprehensive income (loss)

 

 

35.4

 

 

 

(235.5

)

 

 

392.9

 

 

 

11.8

 

Less: Comprehensive income attributable to

   noncontrolling interests

 

 

(1.9

)

 

 

(0.5

)

 

 

(2.8

)

 

 

(1.6

)

Comprehensive income (loss) attributable to common

   stockholders

 

$

33.5

 

 

$

(236.0

)

 

$

390.1

 

 

$

10.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

4


WESTROCK COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions, except per share data)

 

March 31,

2021

 

 

September 30,

2020

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

334.0

 

 

$

251.1

 

Accounts receivable (net of allowances of $71.5 and $66.3)

 

 

2,416.2

 

 

 

2,142.7

 

Inventories

 

 

2,090.9

 

 

 

2,023.4

 

Other current assets

 

 

529.8

 

 

 

520.5

 

Assets held for sale

 

 

13.7

 

 

 

7.0

 

Total current assets

 

 

5,384.6

 

 

 

4,944.7

 

Property, plant and equipment, net

 

 

10,572.5

 

 

 

10,778.9

 

Goodwill

 

 

5,959.1

 

 

 

5,962.2

 

Intangibles, net

 

 

3,499.9

 

 

 

3,667.2

 

Restricted assets held by special purpose entities

 

 

1,264.0

 

 

 

1,267.5

 

Prepaid pension asset

 

 

436.8

 

 

 

368.7

 

Other assets

 

 

1,855.0

 

 

 

1,790.5

 

Total Assets

 

$

28,971.9

 

 

$

28,779.7

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of debt

 

$

549.5

 

 

$

222.9

 

Accounts payable

 

 

1,796.8

 

 

 

1,674.2

 

Accrued compensation and benefits

 

 

515.1

 

 

 

386.7

 

Other current liabilities

 

 

691.3

 

 

 

645.1

 

Total current liabilities

 

 

3,552.7

 

 

 

2,928.9

 

Long-term debt due after one year

 

 

8,393.1

 

 

 

9,207.7

 

Pension liabilities, net of current portion

 

 

298.5

 

 

 

305.2

 

Postretirement benefit liabilities, net of current portion

 

 

147.0

 

 

 

145.4

 

Non-recourse liabilities held by special purpose entities

 

 

1,132.0

 

 

 

1,136.5

 

Deferred income taxes

 

 

2,872.6

 

 

 

2,916.9

 

Other long-term liabilities

 

 

1,503.8

 

 

 

1,490.3

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

2.2

 

 

 

1.3

 

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;

   265.9 million and 260.4 million shares outstanding at March 31,

   2021 and September 30, 2020, respectively

 

 

2.7

 

 

 

2.6

 

Capital in excess of par value

 

 

11,057.5

 

 

 

10,916.3

 

Retained earnings

 

 

1,186.0

 

 

 

1,031.6

 

Accumulated other comprehensive loss

 

 

(1,194.3

)

 

 

(1,319.9

)

Total stockholders’ equity

 

 

11,051.9

 

 

 

10,630.6

 

Noncontrolling interests

 

 

18.1

 

 

 

16.9

 

Total equity

 

 

11,070.0

 

 

 

10,647.5

 

Total Liabilities and Equity

 

$

28,971.9

 

 

$

28,779.7

 

 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

5


WESTROCK COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

(In millions, except per share data)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Number of Shares of Common Stock Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

263.3

 

 

 

258.4

 

 

 

260.4

 

 

 

257.8

 

Issuance of common stock, net of stock received for

   tax withholdings

 

 

2.6

 

 

 

0.8

 

 

 

5.5

 

 

 

1.4

 

Balance at end of period

 

 

265.9

 

 

 

259.2

 

 

 

265.9

 

 

 

259.2

 

Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

2.6

 

 

$

2.6

 

 

$

2.6

 

 

$

2.6

 

Issuance of common stock, net of stock received for

   tax withholdings

 

 

0.1

 

 

 

 

 

 

0.1

 

 

 

 

Balance at end of period

 

 

2.7

 

 

 

2.6

 

 

 

2.7

 

 

 

2.6

 

Capital in Excess of Par Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

10,949.4

 

 

 

10,770.0

 

 

 

10,916.3

 

 

 

10,739.4

 

Compensation expense under share-based plans

 

 

31.0

 

 

 

16.0

 

 

 

50.9

 

 

 

29.5

 

Issuance of common stock, net of stock received for

   tax withholdings

 

 

77.1

 

 

 

(1.6

)

 

 

90.3

 

 

 

15.5

 

Balance at end of period

 

 

11,057.5

 

 

 

10,784.4

 

 

 

11,057.5

 

 

 

10,784.4

 

Retained Earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

1,126.3

 

 

 

2,087.5

 

 

 

1,031.6

 

 

 

1,997.1

 

Adoption of accounting standards (1)

 

 

 

 

 

 

 

 

(3.8

)

 

 

73.5

 

Net income attributable to common stockholders

 

 

112.5

 

 

 

148.1

 

 

 

264.5

 

 

 

286.6

 

Dividends declared (per share - $0.20, $0.465,

  $0.40 and $0.93) (2)

 

 

(52.6

)

 

 

(121.2

)

 

 

(106.1

)

 

 

(242.8

)

Issuance of common stock, net of stock received for

   tax withholdings

 

 

(0.2

)

 

 

 

 

 

(0.2

)

 

 

 

Balance at end of period

 

 

1,186.0

 

 

 

2,114.4

 

 

 

1,186.0

 

 

 

2,114.4

 

Accumulated Other Comprehensive Loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

(1,115.3

)

 

 

(1,034.9

)

 

 

(1,319.9

)

 

 

(1,069.2

)

Adoption of accounting standards (1)

 

 

 

 

 

 

 

 

 

 

 

(73.4

)

Other comprehensive (loss) income, net of tax

 

 

(79.0

)

 

 

(384.1

)

 

 

125.6

 

 

 

(276.4

)

Balance at end of period

 

 

(1,194.3

)

 

 

(1,419.0

)

 

 

(1,194.3

)

 

 

(1,419.0

)

Total Stockholders’ equity

 

 

11,051.9

 

 

 

11,482.4

 

 

 

11,051.9

 

 

 

11,482.4

 

Noncontrolling Interests: (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

17.1

 

 

 

15.3

 

 

 

16.9

 

 

 

14.3

 

Net income

 

 

1.0

 

 

 

0.3

 

 

 

1.2

 

 

 

1.3

 

Balance at end of period

 

 

18.1

 

 

 

15.6

 

 

 

18.1

 

 

 

15.6

 

Total equity

 

$

11,070.0

 

 

$

11,498.0

 

 

$

11,070.0

 

 

$

11,498.0

 

 

 

(1)

For fiscal 2021, the amount relates to the adoption of ASU 2016-13 (as hereinafter defined). For fiscal 2020, the amount relates primarily to the adoption of ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

 

(2)

Includes cash dividends paid and dividend equivalent units on certain restricted stock awards.

 

(3)

Excludes amounts related to contingently redeemable noncontrolling interests, which are separately classified outside of permanent equity on the Condensed Consolidated Balance Sheets. 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

6


WESTROCK COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Six Months Ended

 

 

 

March 31,

 

(In millions)

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

 

 

Consolidated net income

 

$

266.9

 

 

$

288.4

 

Adjustments to reconcile consolidated net income to net cash provided

   by operating activities:

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

725.9

 

 

 

755.7

 

Cost of real estate sold

 

 

 

 

 

16.1

 

Deferred income tax (benefit) expense

 

 

(54.6

)

 

 

11.4

 

Share-based compensation expense

 

 

51.1

 

 

 

29.6

 

401(k) match and company contribution in common stock

 

 

89.5

 

 

 

 

Pension and other postretirement funding more than expense (income)

 

 

(56.1

)

 

 

(41.1

)

Gain on sale of sawmill

 

 

(16.5

)

 

 

 

Gain on sale of investment

 

 

(14.7

)

 

 

 

Multiemployer pension withdrawal expense

 

 

 

 

 

0.9

 

Other impairment adjustments

 

 

22.5

 

 

 

2.2

 

Loss (gain) on disposal of plant and equipment and other, net

 

 

2.8

 

 

 

(6.2

)

Other, net

 

 

(53.1

)

 

 

(11.3

)

Change in operating assets and liabilities, net of acquisitions and

   divestitures:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(257.0

)

 

 

(60.4

)

Inventories

 

 

(79.9

)

 

 

(63.2

)

Other assets

 

 

(126.6

)

 

 

(132.9

)

Accounts payable

 

 

111.5

 

 

 

(106.7

)

Income taxes

 

 

52.7

 

 

 

17.7

 

Accrued liabilities and other

 

 

187.2

 

 

 

(101.4

)

Net cash provided by operating activities

 

 

851.6

 

 

 

598.8

 

Investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(303.0

)

 

 

(616.2

)

Investment in unconsolidated entities

 

 

(0.1

)

 

 

(0.7

)

Proceeds from sale of sawmill

 

 

58.5

 

 

 

 

Proceeds from sale of investments

 

 

28.3

 

 

 

 

Proceeds from sale of property, plant and equipment

 

 

3.1

 

 

 

21.3

 

Proceeds from property, plant and equipment insurance settlement

 

 

1.7

 

 

 

1.4

 

Other, net

 

 

16.3

 

 

 

4.9

 

Net cash used for investing activities

 

 

(195.2

)

 

 

(589.3

)

Financing activities:

 

 

 

 

 

 

 

 

Additions to revolving credit facilities

 

 

395.0

 

 

 

375.0

 

Repayments of revolving credit facilities

 

 

(275.0

)

 

 

(65.0

)

Additions to debt

 

 

255.2

 

 

 

580.1

 

Repayments of debt

 

 

(857.0

)

 

 

(208.2

)

Repayments of commercial paper, net

 

 

 

 

 

(34.8

)

Other debt additions, net

 

 

7.0

 

 

 

85.9

 

Issuances of common stock, net of related tax withholdings

 

 

0.2

 

 

 

13.4

 

Cash dividends paid to stockholders

 

 

(105.8

)

 

 

(240.7

)

Cash distributions paid to noncontrolling interests

 

 

(0.7

)

 

 

(0.7

)

Other, net

 

 

(3.5

)

 

 

2.1

 

Net cash (used for) provided by financing activities

 

 

(584.6

)

 

 

507.1

 

Effect of exchange rate changes on cash, cash equivalents

   and restricted cash

 

 

11.1

 

 

 

(28.0

)

Increase in cash, cash equivalents and restricted cash

 

 

82.9

 

 

 

488.6

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

251.1

 

 

 

151.6

 

Cash, cash equivalents and restricted cash at end of period

 

$

334.0

 

 

$

640.2

 

 

7


 

 

 

 

Six Months Ended

 

 

 

March 31,

 

(In millions)

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Income taxes, net of refunds

 

$

82.2

 

 

$

75.1

 

Interest, net of amounts capitalized

 

$

174.7

 

 

$

204.4

 

 

 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 


 

 

8


 

 

 

WESTROCK COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Month Periods Ended March 31, 2021

(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 sustainable fiber-based paper and packaging solutions. 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 our operating and business locations in North America, South America, Europe, Asia and Australia.

 

Note 1.

Basis of Presentation and Significant Accounting Policies

Basis of Presentation

 

Our independent registered public accounting firm has not audited the accompanying interim financial statements. We derived the condensed consolidated balance sheet at September 30, 2020 from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (the “Fiscal 2020 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 income for the three and six months ended March 31, 2021 and March 31, 2020, our statements of comprehensive income (loss) for the three and six months ended March 31, 2021 and March 31, 2020, our balance sheets at March 31, 2021 and September 30, 2020, our statements of cash flows for the six months ended March 31, 2021 and March 31, 2020, and our statements of equity for the three and six months ended March 31, 2021 and March 31, 2020.

 

We have condensed or omitted certain notes and other information from the interim financial statements presented in this report. Therefore, these interim financial statements should be read in conjunction with the Fiscal 2020 Form 10-K. The results for the three and six months ended March 31, 2021 are not necessarily indicative of results that may be expected for the full year.

Reclassifications and Adjustments

Certain amounts in prior periods have been reclassified to conform with the current year presentation.

 

COVID-19 Pandemic

 

The global impact of the COVID-19 pandemic (“COVID-19”) continues to evolve. The pandemic has affected our operational and financial performance 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, the actions taken to contain or mitigate its impact (including the distribution and effectiveness of vaccines), and the direct and indirect economic effects of the pandemic and related containment measures, among others.

 

At March 31, 2021, we evaluated the then current economic environment, including our assessment of the impact of COVID-19, as well as the ransomware incident discussed below, and there were no indicators of impairment of our long-lived assets, including goodwill, that required a quantitative test to be performed. Our estimates involve numerous assumptions about the future growth and potential volatility in revenues and costs, capital expenditures, industry and global economic factors, interest rate environment and future business strategy. Accordingly, our accounting estimates may materially change from period to period due to changing market factors, including those driven by COVID-19. We will continue to monitor future events, changes in circumstances and the potential impact thereof, including performing interim goodwill impairment assessments, as warranted. If actual results are not consistent with our assumptions and estimates, we may be exposed to impairment losses that could be material. See “Note 1. Description of Business and Summary of Significant Accounting Policies — Goodwill and Long-Lived Assets” in the Fiscal 2020 Form 10-K for additional

 

9


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

 

 

information regarding the results of, and our methods and assumptions applied to perform, our goodwill impairment testing in fiscal 2020.

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. These actions included taking preventative measures, including shutting down certain systems out of an abundance of caution, as well as taking steps to supplement existing security monitoring, scanning and protective measures. We notified law enforcement and contacted our customers to apprise them of the situation.

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. All systems are 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. 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. While shipments from some of our facilities initially lagged behind production levels, this gap closed as systems were restored during the second quarter of fiscal 2021. In locations where technology issues were identified, we used alternative methods, in many cases manual methods, to process and ship orders. We systematically brought our information systems back online in a controlled, phased approach.

We estimate the segment income impact of the lost sales and operational disruption of this incident on our operations in the second quarter of fiscal 2021 to be approximately $50 million, as well as approximately $20 million of ransomware recovery costs, primarily professional fees. We estimate that the total insurance claim will be approximately $75 million. We expect to recover substantially all of the ransomware losses from cyber and business interruption insurance in future periods. Disputes over the extent of insurance coverage for claims are not uncommon, and there will be a time lag between the initial incurrence of costs and the receipt of any insurance proceeds. While the impact of lost sales and operational disruption is behind us, we expect to incur some additional recovery costs in the second half of fiscal 2021, albeit at a diminished rate.

We are making information technology investments that we had planned to make in future periods in order to further strengthen our information security infrastructure. We engaged a leading cybersecurity defense firm that completed a forensics investigation of the ransomware incident and we are taking appropriate actions in response to the findings. For example, in the short-term, we reset all credentials Company-wide and strengthened security tooling across our servers and workstations. In the long-term, we are continuing to advance the maturity and effectiveness of our information security resiliency strategy and capabilities. Our technology team has accelerated its roadmap to further strengthen the resiliency of our information security infrastructure across the Company that aims to enable us to detect, respond and recover more quickly from security and technical incidents. More specifically, we plan to take actions to improve our security monitoring capabilities and enhance the information security within our mills and plants.

 

Significant Accounting Policies

 

See “Note 1. Description of Business and Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements section in the Fiscal 2020 Form 10-K for a summary of our significant accounting policies.

 

Recent Accounting Developments

 

New Accounting Standards — Recently Adopted

 

In November 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-18 “Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606”, which provides targeted amendments to Accounting Standards Codification (“ASC”) 808, “Collaborative arrangements” and ASC 606, “Revenues from Contracts with Customers” (“ASC 606”). The amendments in this ASU require transactions between participants in a collaborative arrangement to be accounted for under ASC 606 only when the counterparty is a customer. We adopted the provisions of ASU 2018-18 on October 1, 2020. The adoption did not have a material impact on our consolidated financial statements.

 

10


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

 

 

In October 2018, the FASB issued ASU 2018-17Consolidation: Targeted Improvements to Related Party Guidance for Variable Interest Entities”. This ASU changes how entities evaluate decision-making fees under the variable interest entity guidance. To determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportionate basis, rather than in their entirety, as currently required under generally accepted accounting principles in the U.S. (“GAAP”). We adopted the provisions of ASU 2018-17 on October 1, 2020. The adoption did not have a material impact on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-15 “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. We adopted the provisions of ASU 2018-15 prospectively on October 1, 2020. The adoption did not have a material impact on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-14 “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Changes to the Disclosure Requirements for Defined Benefit Plans”. The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans to remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures and add disclosure requirements identified as relevant. We adopted the provisions of ASU 2018-14 retrospectively on October 1, 2020.

 

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326)” (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments and replaces the incurred loss model with a model that reflects expected credit losses. In April 2019, the FASB issued ASU 2019-04 “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” (“ASU 2019-04”), which addresses issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. In May 2019, the FASB issued ASU 2019-05 “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief” (“ASU 2019-05”), which provides targeted transition relief allowing entities to make an irrevocable one-time election upon adoption of the new credit losses standard to measure financial assets previously measured at amortized cost (except held-to-maturity securities) using the fair value option. In November 2019, the FASB issued ASU 2019-11 “Codification Improvements to Topic 326, Financial Instruments – Credit Losses” (“ASU 2019-11”), which makes certain narrow-scope amendments to Topic 326, including allowing entities to exclude accrued interest amounts from various required disclosures under Topic 326. In February 2020, the FASB issued ASU 2020-02 “Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842)” (“ASU 2020-02”), which adds and amends paragraphs in the ASC to reflect the issuance of SEC Staff Accounting Bulletin No. 119 primarily related to the new credit losses standard. The provisions of ASU 2019-04, ASU 2019-05, ASU 2019-11 and ASU 2020-02 related to Topic 326 are effective concurrent with the adoption of ASU 2016-13. We adopted ASU 2016-13 and its subsequent revisions using the modified retrospective transition approach on October 1, 2020. The adoption of ASU 2016-13 and its subsequent revisions resulted in us recognizing a cumulative effect adjustment of $3.8 million (net of tax) decrease to opening balance of retained earnings related to our allowance for doubtful accounts primarily for our trade accounts receivable balance.

 

New Accounting Standards — Recently Issued

 

In March 2020, the FASB issued ASU 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. This ASU provides temporary optional expedients and exceptions for applying GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. In January 2021, the FASB issued ASU 2021-01, which adds implementation guidance to clarify certain optional expedients in Topic 848. The ASUs can be adopted after their respective issuance dates through December 31, 2022. We are evaluating the impact of these ASUs.

 

 

11


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

 

 

 

In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 under GAAP. This ASU also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020 (fiscal 2022 for us) and interim periods within those fiscal years. Early adoption is permitted. We are evaluating the impact of this ASU.

 

Note 2.

Revenue Recognition

 

Disaggregated Revenue

 

ASC 606 requires that we disaggregate revenue from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The tables below disaggregate our revenue by geographical market and product type (segment). Net sales are attributed to geographical markets based on our selling location. In fiscal 2020, we completed our real estate monetization; therefore, we will not have any Land and Development sales in fiscal 2021.

 

 

 

Three Months Ended March 31, 2021

 

(In millions)

 

Corrugated Packaging

 

 

Consumer Packaging

 

 

Intersegment Sales

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Geographical Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

2,797.1

 

 

$

1,231.7

 

 

$

(65.3

)

 

$

3,963.5

 

South America

 

 

96.5

 

 

 

23.1

 

 

 

 

 

 

119.6

 

Europe

 

 

1.1

 

 

 

265.9

 

 

 

 

 

 

267.0

 

Asia Pacific

 

 

18.7

 

 

 

69.2

 

 

 

(0.2

)

 

 

87.7

 

Total

 

$

2,913.4

 

 

$

1,589.9

 

 

$

(65.5

)

 

$

4,437.8

 

 

 

 

 

Six Months Ended March 31, 2021

 

(In millions)

 

Corrugated Packaging

 

 

Consumer Packaging

 

 

Intersegment Sales

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Geographical Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

5,567.3

 

 

$

2,485.7

 

 

$

(123.2

)

 

$

7,929.8

 

South America

 

 

177.5

 

 

 

45.3

 

 

 

 

 

 

222.8

 

Europe

 

 

2.0

 

 

 

515.2

 

 

 

(0.1

)

 

 

517.1

 

Asia Pacific

 

 

31.1

 

 

 

138.8

 

 

 

(0.3

)

 

 

169.6

 

Total

 

$

5,777.9

 

 

$

3,185.0

 

 

$

(123.6

)

 

$

8,839.3

 

 

 

 

 

Three Months Ended March 31, 2020

 

(In millions)

 

Corrugated Packaging

 

 

Consumer Packaging

 

 

Land and Development

 

 

Intersegment Sales

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Geographical Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

2,765.7

 

 

$

1,281.6

 

 

$

 

 

$

(51.4

)

 

$

3,995.9

 

South America

 

 

100.7

 

 

 

18.8

 

 

 

 

 

 

 

 

 

119.5

 

Europe

 

 

2.5

 

 

 

253.4

 

 

 

 

 

 

 

 

 

255.9

 

Asia Pacific

 

 

13.6

 

 

 

62.5

 

 

 

 

 

 

(0.1

)

 

 

76.0

 

Total

 

$

2,882.5

 

 

$

1,616.3

 

 

$

 

 

$

(51.5

)

 

$

4,447.3

 

 

 

 

12


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

 

 

 

 

 

Six Months Ended March 31, 2020

 

(In millions)

 

Corrugated Packaging

 

 

Consumer Packaging

 

 

Land and Development

 

 

Intersegment Sales

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Geographical Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

5,554.6

 

 

$

2,480.4

 

 

$

18.9

 

 

$

(92.9

)

 

$

7,961.0

 

South America

 

 

208.3

 

 

 

38.8

 

 

 

 

 

 

 

 

 

247.1

 

Europe

 

 

4.3

 

 

 

498.0

 

 

 

 

 

 

 

 

 

502.3

 

Asia Pacific

 

 

24.8

 

 

 

136.0

 

 

 

 

 

 

(0.2

)

 

 

160.6

 

Total

 

$

5,792.0

 

 

$

3,153.2

 

 

$

18.9

 

 

$

(93.1

)

 

$

8,871.0

 

 

Revenue Contract Balances

 

Contract assets are rights to consideration in exchange for goods that we have transferred to a customer when that right is conditional on something other than the passage of time. Contract assets are reduced when the control of the goods passes to the customer. Contract liabilities represent obligations to transfer goods or services to a customer for which we have received consideration. Contract liabilities are reduced once control of the goods is transferred to the customer.

 

The opening and closing balances of our contract assets and contract liabilities are as follows. Contract assets and contract liabilities are reported within Other current assets and Other current liabilities, respectively, on the condensed consolidated balance sheet.

 

(In millions)

 

Contract Assets

(Short-Term)

 

 

Contract Liabilities

(Short-Term)

 

 

 

 

 

 

 

 

 

 

Beginning balance - October 1, 2020

 

$

185.8

 

 

$

12.0

 

Ending balance - March 31, 2021

 

 

191.1

 

 

 

21.9

 

Increase

 

$

5.3

 

 

$

9.9

 

 

Note 3.

Restructuring and Other Costs

Summary of Restructuring and Other Initiatives

We recorded pre-tax restructuring and other costs of $5.2 and $12.9 million for the three and six months ended March 31, 2021 and $16.4 and $46.5 million for the three and six months ended March 31, 2020. These amounts are not comparable since the timing and scope of the individual actions associated with each restructuring, acquisition, integration or divestiture can vary. We present our restructuring and other costs in more detail below.

The following table summarizes our Restructuring and other costs (in millions):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Restructuring

 

$

4.1

 

 

$

8.0

 

 

$

10.7

 

 

$

32.7

 

Other

 

 

1.1

 

 

 

8.4

 

 

 

2.2

 

 

 

13.8

 

Restructuring and other costs

 

$

5.2

 

 

$

16.4

 

 

$

12.9

 

 

$

46.5

 

 

 

13


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

 

 

 

Restructuring

Our restructuring charges are primarily associated with restructuring portions of our operations (i.e. partial or complete plant closures), employee costs due to merger and acquisition-related workforce reductions and voluntary retirement programs in fiscal 2019 and 2020. A partial plant closure may consist of shutting down a machine and/or a workforce reduction.

When we close a facility, if necessary, we recognize a write-down to reduce the carrying value of related property, plant and equipment and lease right-of-use assets (“ROU”) to their fair value and record charges for severance and other employee-related costs. We reduce the carrying value of the assets classified as held for sale to their estimated fair value less cost to sell. Any subsequent change in fair value less cost to sell prior to disposition is recognized as it is identified; however, no gain is recognized in excess of the cumulative loss previously recorded unless the actual selling price exceeds the original carrying value. For plant closures, we also generally expect to record costs for equipment relocation, facility carrying costs and costs to terminate a lease or contract before the end of its term.

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 and/or further optimize our system following mergers and acquisitions or a changing business environment. Therefore, we generally transfer a substantial portion of each closed plant’s assets and production to our other plants. We believe these actions have allowed us to more effectively manage our business. In our former Land and Development segment, the restructuring charges primarily consisted of severance and other employee costs associated with the wind-down of operations and lease costs.

 

 

14


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 charges related to active restructuring initiatives that we incurred during the three and six months ended March 31, 2021 and 2020, the cumulative recorded amount since we started the initiatives and our estimate of the total we expect to incur (in millions):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

March 31,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

Cumulative

 

 

Total

Expected

 

Corrugated Packaging

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net property, plant and equipment costs

 

$

 

 

$

0.3

 

 

$

 

 

$

2.5

 

 

$

94.4

 

 

$

94.4

 

Severance and other employee costs

 

 

(0.4

)

 

 

(3.5

)

 

 

(1.1

)

 

 

3.6

 

 

 

51.3

 

 

 

51.3

 

Equipment and inventory relocation

  costs

 

 

 

 

 

0.9

 

 

 

 

 

 

1.3

 

 

 

8.7

 

 

 

9.2

 

Facility carrying costs

 

 

0.2

 

 

 

0.4

 

 

 

1.0

 

 

 

1.0

 

 

 

21.9

 

 

 

23.4

 

Other costs

 

 

0.4

 

 

 

0.2

 

 

 

0.5

 

 

 

0.4

 

 

 

4.0

 

 

 

4.0

 

Restructuring total

 

$

0.2

 

 

$

(1.7

)

 

$

0.4

 

 

$

8.8

 

 

$

180.3

 

 

$

182.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Packaging

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net property, plant and equipment costs

 

$

 

 

$

 

 

$

0.2

 

 

$

0.5

 

 

$

35.3

 

 

$

35.3

 

Severance and other employee costs

 

 

2.4

 

 

 

7.4

 

 

 

5.9

 

 

 

13.1

 

 

 

43.3

 

 

 

43.3

 

Equipment and inventory relocation

  costs

 

 

 

 

 

 

 

 

0.2

 

 

 

0.1

 

 

 

3.8

 

 

 

3.8

 

Facility carrying costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.0

 

 

 

1.3

 

Other costs

 

 

0.8

 

 

 

0.4

 

 

 

1.6

 

 

 

0.6

 

 

 

20.4

 

 

 

20.4

 

Restructuring total

 

$

3.2

 

 

$

7.8

 

 

$

7.9

 

 

$

14.3

 

 

$

103.8

 

 

$

104.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land and Development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net property, plant and equipment costs

 

$

 

 

$

 

 

$

 

 

$

 

 

$

1.8

 

 

$

1.8

 

Severance and other employee costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13.8

 

 

 

13.8

 

Other costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.0

 

 

 

5.0

 

Restructuring total

 

$

 

 

$

 

 

$

 

 

$

 

 

$

20.6

 

 

$

20.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance and other employee costs

 

$

(0.7

)

 

 

1.2

 

 

 

0.9

 

 

 

8.9

 

 

$

60.3

 

 

$

60.3

 

Other costs

 

 

1.4

 

 

 

0.7

 

 

 

1.5

 

 

 

0.7

 

 

 

10.5

 

 

 

10.5

 

Restructuring total

 

$

0.7

 

 

$

1.9

 

 

$

2.4

 

 

$

9.6

 

 

$

70.8

 

 

$

70.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net property, plant and equipment costs

 

$

 

 

$

0.3

 

 

$

0.2

 

 

$

3.0

 

 

$

131.5

 

 

$

131.5

 

Severance and other employee costs

 

 

1.3

 

 

 

5.1

 

 

 

5.7

 

 

 

25.6

 

 

 

168.7

 

 

 

168.7

 

Equipment and inventory relocation

  costs

 

 

 

 

 

0.9

 

 

 

0.2

 

 

 

1.4

 

 

 

12.5

 

 

 

13.0

 

Facility carrying costs

 

 

0.2

 

 

 

0.4

 

 

 

1.0

 

 

 

1.0

 

 

 

22.9

 

 

 

24.7

 

Other costs

 

 

2.6

 

 

 

1.3

 

 

 

3.6

 

 

 

1.7

 

 

 

39.9

 

 

 

39.9

 

Restructuring total

 

$

4.1

 

 

$

8.0

 

 

$

10.7

 

 

$

32.7

 

 

$

375.5

 

 

$

377.8

 

 

 

 

15


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

 

 

 

We have defined Net property, plant and equipment costs” as used in this Note 3 as property, plant and equipment write-downs, subsequent adjustments to fair value for assets classified as held for sale, subsequent (gains) or losses on sales of property, plant and equipment and related parts and supplies on such assets, if any.

Other Costs

Our other costs consist of acquisition, integration and divestiture costs. We incur costs when we acquire or divest businesses. Acquisition costs include costs associated with transactions, whether consummated or not, such as advisory, legal, accounting, valuation and other professional or consulting fees, as well as potential litigation costs associated with those activities. We incur integration costs pre- and post-acquisition that reflect work being performed to facilitate merger and acquisition integration, such as work associated with information systems and other projects, including spending to support future acquisitions, and primarily consist of professional services and labor. Divestiture costs consist primarily of similar professional fees. We consider acquisition, integration and divestiture costs to be corporate costs regardless of the segment or segments involved in the transaction.

The following table presents our acquisition and integration costs (in millions):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Acquisition costs

 

$

0.5