Westrock Company

Good morning, and welcome to the Westrop Company Fiscal Q2 2022 Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Rob Quartaro, Senior Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining our second fiscal quarter 2022 earnings call. We issued our press release this morning and posted the accompanying presentation to the Investor Relations section of our website. They can be accessed at ir.westrock.com or via a link on the application you are using to view this webcast. With me on today's call are West Rock's Chief Executive Officer, David Sewell, and our Chief Financial Officer, Alex Pease. Following our prepared comments, we will open the call for a question and answer session. During today's call, we will be making forward-looking statements involving our plans, expectations, estimates, and beliefs related to future events. These statements may involve a number of risks and uncertainties that could cause actual results to differ materially from those we discussed during the call. We describe these risks and uncertainties in our filings with the SEC, including our 10-K for the fiscal year ended September 30, 2021. We will also be referencing non-GAAP financial measures during the call. We have provided reconciliations of these non-GAAP measures to the most directly comparable GAAP measures in the appendix of the slide presentation. As mentioned previously, the slide presentation is available on our website. With that, I'll now turn it over to you, David.

Thank you, Rob, and thank you all for joining our earnings call today. To begin our call, I'll provide a brief summary of the recent actions we've taken and provide an overview of our fiscal second quarter results. Following that, our CFO, Alex Pease, will provide a deep dive into the quarterly performance for our segments and other critical financial performance. He'll also provide guidance for the fiscal third quarter and the full year. We will then move to Q&A to answer any questions you may have. Over the past year, we've been making significant progress in our efforts to transform Westrock into the very best paper and packaging company. We have aligned our mills into one organization and updated our operating segments to provide increased transparency and better reflect how we manage our business. We've established a global supply chain organization to reduce costs and drive efficiencies. We've launched the Westrock operating system to standardize reporting and drive greater productivity. and we have completed a strategic review of our assets, taking our first step to rationalize our portfolio and drive improved return on invested capital. From a balance sheet and capital allocation perspective, we achieved our initial leverage target last year. At the same time, we have increased our dividend 25% and completed approximately $700 million of share repurchases over the last 12 months. While we already have a lot to be proud of, we are only just beginning. Turning to slide four, today we reported strong results with record second fiscal quarter consolidated adjusted EBITDA and adjusted EPS above the high end of our guidance. I want to take just a minute to thank all of our team members at Westrock for their hard work in helping us achieve this success. Second quarter sales were a record $5.4 billion, up 21% year over year. We delivered consolidated adjusted EBITDA of $854 million, up 33% year over year, and adjusted earnings per share of $1.17, more than double the year ago numbers. We achieved these outstanding results during another quarter of heavy scheduled maintenance, and I'm happy to report that our maintenance projects were completed successfully. We have already finished the majority of our planned maintenance for this fiscal year. We continue to see robust demand and strong backlogs across our entire system while also navigating the tight labor market and supply chain disruptions. As the second quarter progressed, we experienced declines in COVID-related absenteeism and improved production levels at our converting facilities. We exited the quarter with appropriate inventory levels as we enter the stronger demand season in the back half of the year. We ended the quarter with net leverage of 2.34 times while aggressively buying back stock. We have nearly completed the $500 million buyback target that we spoke about last quarter and expect to finish by the end of May. Once completed, we will have repurchased approximately $700 million of our stock over the last 12 months. Today, we also announced that our Board has authorized an additional 25 million shares for repurchase, representing approximately 10% of our outstanding shares. Looking ahead, we will continue to return capital to our shareholders through a sustainable and growing dividend, as well as opportunistic share repurchases. Turning to slide 5, our previously published price increases have more than offset unprecedented inflation in fiber, labor, freight, energy, and chemicals. We are still implementing container board and box board price increases, and we expect these price realizations to more than offset inflation for the foreseeable future. On the next slide, as we've previously discussed, we completed a portfolio review and have identified assets that don't meet our return thresholds or align with our strategic priorities. In April, we announced the decision to close our Panama City mill as a first step in this portfolio refinement effort. I am incredibly grateful for our mill employees and their contributions to building our company. We are continuing to support our employees during this difficult transition by offering opportunities at other facilities and providing outplacement assistance. This is never an easy decision. However, given the significant capital investments required to keep the mill operational, we do not see a path to achieving our ROIC targets. We are also strategically reducing our exposure to the fluff pulp market and will direct our resources toward more attractive end markets. Our Panama City mill provided container board capacity of 353,000 tons and pulp capacity of 292,000 tons. We expect to shift some container board grades to other mills within our network. As a result of the closure, we expect approximately $450 million of one-time costs, of which approximately three-fourths are non-cash. We recognize $355 million of expense in the second quarter, and we expect to incur the remainder over the next several years. Going forward, we expect ongoing EBITDA to be negatively impacted by approximately $65 million annually. Before I turn it over to Alex to discuss the detailed results for the quarter, I wanted to remind you once again about our Investor Day coming up next week. We are looking forward to seeing many of you in New York, where we will outline our long-term strategy and goals. We have a great story to share with you, and you will get a chance to hear from many members of our talented management team. As a preview and part of our updated capital allocation strategy, one of our goals will be to reduce our leverage even further with a new net leverage target of 1.75 times to 2.25 times. We remain committed to prudent balance sheet management, and we are maintaining our free cash flow guidance of over $1.3 billion in fiscal 2022. On Investor Day, we'll also share information about the many efforts underway across Westrock to focus on high-value markets, enhance our margins, and improve our productivity. Now, I'll turn it over to Alex to review our results.