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Fair Value

12 Months Ended

Sep. 30, 2020

Note 12.

Fair Value

Assets and Liabilities Measured or Disclosed at Fair Value

We estimate fair values in accordance with ASC 820 “Fair Value Measurement”. ASC 820 provides a framework for measuring fair value and expands disclosures required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and a hierarchy prioritizing the inputs to valuation techniques. ASC 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Additionally, ASC 820 defines levels within the hierarchy based on the availability of quoted prices for identical items in active markets, similar items in active or inactive markets and valuation techniques using observable and unobservable inputs. We incorporate credit valuation adjustments to reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in our fair value measurements.

We disclose the fair value of our long-term debt in “Note 13. Debt” and the fair value of our pension and postretirement assets and liabilities in “Note 5. Retirement Plans”. We have, or from time to time may have, financial instruments recognized at fair value including Supplemental Plans, interest rate derivatives, commodity derivatives or other similar classes of assets or liabilities, the fair value of which are not significant. See “Note 1 — Description of Business and Summary of Significant Accounting Policies — Fair Value of Financial Instruments and Nonfinancial Assets and Liabilities” for additional information.

Accounts Receivable Sales Agreement

On September 25, 2018 we entered into a $550.0 million agreement (the “A/R Sales Agreement”) to sell to a third-party financial institution all of the short-term receivables generated from certain customer trade accounts. On September 19, 2019 and September 17, 2020, we further amended the A/R Sales Agreement and increased the purchase limit to $650.0 million and $700.0 million, respectively. The terms of the A/R Sales Agreement limit the balance of receivables sold to the amount available to fund such receivables sold and eliminated the receivable for proceeds from the financial institution at any transfer date. Effective with the September 17, 2020 amendment, the facility is committed and has a term of 364 days. Transfers under the A/R Sales Agreement meet the requirements to be accounted for as sales in accordance with guidance in ASC 860, “Transfers and Servicing”. These customers are not included in the Receivables Securitization Facility that is discussed in “Note 13. Debt”.

In connection with the September 25, 2018 termination of the prior agreement and execution of the A/R Sales Agreement, there was a non-cash transaction of $424.8 million representing the repurchase of receivables previously sold to the financial institution under the prior agreement and the sale of the same receivables to the financial institution under the A/R Sales Agreement.

The following table represents a summary of the activity under the A/R Sales Agreement for fiscal 2020 and 2019 (in millions):

	2020			2019
Receivable from financial institution at beginning of fiscal year	$	—		$	—
Receivables sold to the financial institution and derecognized		2,446.2			2,051.6
Receivables collected by financial institution		(2,449.4	)		(1,971.1	)
Cash proceeds from financial institution		3.2			(80.5	)
Receivable from financial institution at September 30,	$	—		$	—

Receivables sold under our A/R Sales Agreement were approximately $589.4 million and $592.6 million as of September 30, 2020 and September 30, 2019, respectively.

Cash proceeds related to the receivables sold are included in cash from operating activities in the consolidated statement of cash flows in the accounts receivable line item. While the expense recorded in connection with the sale of receivables may vary based on current rates and levels of receivables sold, the expense recorded in connection with the sale of receivables was $12.7 million, $17.3 million and $11.2 million in fiscal 2020, 2019 and 2018, respectively, and is recorded in “other income, net” in the consolidated statements of operations. Although the sales are made without recourse, we maintain continuing involvement with the sold receivables as we provide collections services related to the transferred assets. The associated servicing liability is not material given the high quality of the customers underlying the receivables and the anticipated short collection period.

Fair Value of Nonfinancial Assets and Nonfinancial Liabilities

As discussed in “Note 1. Description of Business and Summary of Significant Accounting Policies”, we measure certain nonfinancial assets and nonfinancial liabilities at fair value on a nonrecurring basis. See “Note 1. Description of Business and Summary of Significant Accounting Policies — Goodwill and Long-Lived Assets” for a discussion of a $1,333.2 million pre-tax non-cash goodwill impairment of our Consumer Packaging reporting unit. See “Note 4. Restructuring and Other Costs” for impairments associated with restructuring activities including the impairment of a paper machine at our Evadale, TX mill included in the Consumer Packaging segment in fiscal 2020, the impairment of a paper machine at our Charleston, SC mill included in the Corrugated Packaging segment in fiscal 2019 and other such similar items presented as “net property, plant and equipment costs”. During fiscal 2020, 2019 and 2018, we did not have any significant non-goodwill or non-restructuring nonfinancial assets or nonfinancial liabilities that were measured at fair value on a nonrecurring basis in periods subsequent to initial recognition other than the following pre-tax non-cash impairments: (i) the $13.0 million pre-tax non-cash impairment of certain mineral rights in fiscal 2019 following the termination of a third party leasing relationship, and (ii) the $31.9 million impairment of certain mineral rights and real estate in fiscal 2018. The $23.6 million impairment of mineral rights in fiscal 2018 was driven by the non-renewal of a lease and associated with declining oil and gas prices, and the other $8.3 million recorded to write-down the carrying value on real estate

projects in connection with the accelerated monetization strategy in our Land and Development segment where the projected sales proceeds were less than the carrying value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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