Segment Information

9 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Segment Information

Note 6. Segment Information

Effective October 1, 2021, we reorganized our reportable segments due to recent changes in our organizational structure and how our chief operating decision maker (“CODM”) makes key operating decisions, allocates resources and assesses the performance of our business. We believe the new segments provide greater visibility into the vertical integration between our mills and converting operations as well as the value of a diversified portfolio of assets, and helps us highlight the performance of our portfolio. Prior to the reorganization, the Company had two reportable segments: Corrugated Packaging and Consumer Packaging. Our reportable segments now are:

•Corrugated Packaging, which consists of our integrated corrugated converting operations and generates its revenues primarily from the sale of corrugated containers and other corrugated products;

•Consumer Packaging, which consists of our integrated consumer converting operations and generates its revenues primarily from the sale of consumer packaging products such as folding cartons and interior partitions;

•Global Paper, which consists of our commercial paper operations and generates its revenues primarily from the sale of containerboard and paperboard to external customers; and

•Distribution, which consists of our distribution and display assembly operations and generates its revenues primarily from the distribution of packaging products and assembly of display products.

We determined our operating segments based on the products and services we offer. Our operating segments are consistent with our internal management structure, and we do not aggregate operating segments. We report the benefit of vertical integration with our mills in each reportable segment that ultimately sells the associated paper and packaging products to our external customers. We account for intersegment sales at prices that approximate market prices.

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

The following tables show selected operating data for our reportable segments (in millions):

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Net sales (aggregate):
Corrugated Packaging	$	2,382.5		$	2,154.7		$	6,921.5		$	6,196.6
Consumer Packaging		1,270.2			1,132.2			3,659.5			3,275.3
Global Paper		1,610.3			1,299.2			4,501.0			3,520.7
Distribution		357.7			322.3			1,044.8			906.4
Total	$	5,620.7		$	4,908.4		$	16,126.8		$	13,899.0
Less net sales (intersegment):
Corrugated Packaging	$	93.5		$	86.9		$	246.2		$	229.9
Consumer Packaging		6.1			5.0			19.0			13.0
Distribution		1.4			0.2			7.6			0.5
Total	$	101.0		$	92.1		$	272.8		$	243.4
Net sales (unaffiliated customers):
Corrugated Packaging	$	2,289.0		$	2,067.8		$	6,675.3		$	5,966.7
Consumer Packaging		1,264.1			1,127.2			3,640.5			3,262.3
Global Paper		1,610.3			1,299.2			4,501.0			3,520.7
Distribution		356.3			322.1			1,037.2			905.9
Total	$	5,519.7		$	4,816.3		$	15,854.0		$	13,655.6
Adjusted EBITDA:
Corrugated Packaging	$	385.2		$	363.9		$	1,002.8		$	1,032.6
Consumer Packaging		234.9			183.3			610.0			522.7
Global Paper		399.0			265.2			940.0			576.5
Distribution		19.2			18.0			53.7			45.4
Total		1,038.3			830.4			2,606.5			2,177.2
Depreciation, depletion and amortization		(377.3	)		(369.0	)		(1,117.4	)		(1,094.9	)
Gain on sale of certain closed facilities		—			—			14.4			0.9
Multiemployer pension withdrawal income		—			—			3.3			—
Mineral rights impairment		(26.0	)		—			(26.0	)		—
Restructuring and other costs		(0.6	)		(6.9	)		(366.3	)		(19.8	)
Non-allocated expenses		(32.8	)		(19.4	)		(66.8	)		(55.9	)
Interest expense, net		(78.5	)		(102.5	)		(237.7	)		(279.8	)
Loss on extinguishment of debt		—			—			(8.2	)		(1.1	)
Other (expense) income, net		(7.2	)		6.4			(0.7	)		13.8
Other adjustments		(3.4	)		(10.6	)		(3.7	)		(64.3	)
Income before income taxes	$	512.5		$	328.4		$	797.4		$	676.1

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2022		2021		2022			2021
Depreciation, depletion and amortization:
Corrugated Packaging	$	169.7	$	169.5	$	503.6		$	512.8
Consumer Packaging		88.2		90.1		264.6			264.2
Global Paper		113.0		102.7		329.0			298.0
Distribution		5.8		5.7		17.4			17.2
Corporate		0.6		1.0		2.8			2.7
Total	$	377.3	$	369.0	$	1,117.4		$	1,094.9
Other adjustments:
Corrugated Packaging	$	0.8	$	1.9	$	(5.6	)	$	13.4
Consumer Packaging		—		1.5		7.7			11.2
Global Paper		2.6		0.9		1.6			3.3
Distribution		—		—		—			0.6
Corporate		—		6.3		—			35.8
Total	$	3.4	$	10.6	$	3.7		$	64.3

As we report the benefit of vertical integration with our mills in each reportable segment that ultimately sells the associated paper and packaging products to our external customers, we correspondingly allocate the assets and capital expenditures of our mill system across our reportable segments. The following tables reflect such allocation.

	June 30, 2022		September 30, 2021
Assets:
Corrugated Packaging	$	11,461.2	$	11,526.0
Consumer Packaging		6,725.0		6,750.5
Global Paper		7,305.1		7,525.7
Distribution		813.9		796.2
Assets held for sale		4.2		10.9
Corporate		2,576.3		2,645.0
Total	$	28,885.7	$	29,254.3
Intangibles, net:
Corrugated Packaging	$	677.6	$	765.9
Consumer Packaging		1,583.7		1,719.2
Global Paper		628.9		677.7
Distribution		141.1		156.0
Total	$	3,031.3	$	3,318.8
Equity method investments:
Corrugated Packaging	$	476.5	$	434.4
Consumer Packaging		0.4		17.7
Global Paper		0.8		0.8
Corporate		0.1		0.4
Total	$	477.8	$	453.3

	Nine Months Ended
	June 30,
	2022		2021
Capital expenditures:
Corrugated Packaging	$	260.3	$	215.0
Consumer Packaging		109.9		116.7
Global Paper		165.8		160.8
Distribution		2.9		0.5
Corporate		30.6		12.4
Total	$	569.5	$	505.4

The changes in the carrying amount of goodwill during the nine months ended June 30, 2022 are as follows (in millions):

	Legacy Reportable Segments						New Reportable Segments
	Corrugated Packaging			Consumer Packaging			Corrugated Packaging			Consumer Packaging			Global Paper			Distribution			Total
Balance as of Sep. 30, 2021	$	3,663.3		$	2,295.9		$	—		$	—		$	—		$	—		$	5,959.2
Segment recasting (1)		(3,663.3	)		(2,295.9	)		2,834.8			1,603.3			1,382.0			139.1			—
Goodwill acquired		—			—			3.2			—			—			—			3.2
Translation adjustments		—			—			(19.2	)		(5.9	)		(7.7	)		(0.8	)		(33.6	)
Balance as of June 30, 2022
Goodwill	$	—		$	—		$	2,818.8		$	1,597.4		$	1,374.3		$	138.3		$	5,928.8

(1)Represents reallocation of goodwill as a result of changes in segments on October 1, 2021.

In accordance with ASC 350, “Intangibles – goodwill and other”, we determined our new reporting units to be the same as our operating segments: Corrugated Packaging, Consumer Packaging, Global Paper and Distribution. As of October 1, 2021, we performed an interim quantitative goodwill impairment test for our new reporting units using a combination of both guideline public company and discounted cash flow valuation methods. In performing the impairment test, we considered factors such as, but not limited to, our expectations for the short-term and long-term impacts of COVID, macroeconomic conditions, industry and market considerations, and financial performance, including forecasted revenue, earnings and capital expenditures of each reporting unit. The discount rate used for each reporting unit ranged from 8.0% to 11.5%. We used perpetual growth rates in the reporting units ranging from 0.0% to 1.0%. Each of our reporting units had a fair value that exceeded its carrying value by more than 10%. If we had concluded that it was appropriate to increase the discount rate we used by 100 basis points to estimate the fair value of each reporting unit, the fair value of each of our reporting units would have continued to exceed its carrying value. There have been no subsequent indicators of impairment of our long-lived assets, including goodwill, that required an interim quantitative test to be performed.