Financial Analysis of West Rock Co.

This report provides a comprehensive financial analysis of West Rock Co. including common size analysis, trend analysis, Du Pont analysis, and financial ratio analysis. The report covers the company's liquidity, profitability, solvency, and valuation.

Running Head: Financial Analysis
WEST ROCK’s FINANCIAL ANALYSIS

Financial Analysis 1

Financial Analysis 2
Table of Contents
Introduction...........................................................................................................................................3
Financial Analysis.................................................................................................................................3
Common size analysis of West Rock in 2017....................................................................................4
 Income statement...................................................................................................................4
 Balance sheet:........................................................................................................................5
Trend analysis of West Rock for 2017, 2016 and 2015.....................................................................6
Du Pont Analysis:..........................................................................................................................6
Financial Ratio analysis.....................................................................................................................7
Intra firm:......................................................................................................................................7
Inter firm:......................................................................................................................................9
Industry comparatives:.................................................................................................................10
Recommendations...............................................................................................................................12
Reflective Writing:..............................................................................................................................12
Conclusion:..........................................................................................................................................13
References:..........................................................................................................................................14

Financial Analysis 3
Introduction
In this report, the financial analysis of West Rock Co. (WRK) will be undertaken. West
Rock is an American corporation that is indulged in the manufacturing business of corrugated
packaging boxes. Headquarter of the company is based at Atlanta, Georgia in United States.
The company produces and sells packing papers and boxes in the markets of North America,
South America, Europe, Asia, Australia and Europe. It belongs to the containers or packaging
industry. The financial analysis of the company will be undertaken the key tool of financial
management i.e. ratio analysis.
Financial Analysis
To analyse the financial performance of West Rock Co. the financial data for the last three
years i.e. 2017, 2016 and 2015 has been taken. The intra-firm’s comparison of financial
results for the different year facilitates the manager to assess the financial position of the
business and the trend followed by the company in various financial aspects in the last few
years can help them to assess the financial sustainability of the business for few of the
coming years. To achieve the above purposes, common size analysis and trend analysis for
the preceding 3 years has been carried in this report.
Also, as a part of financial analysis, an inter-firm analysis of the financial performance of
West Rock in the major aspects such as profitability, liquidity, efficiency, solvency and
gearing position has been carried out taking into account the financial performance of its
major peers such as Packaging Corp of America, Graphic Packaging Holding Co. and
Matthews International Corp. As the said companies belong to the same industry to which
West Rock belongs, the industry comparatives have been used by taking the average of the
financial results of these four corporations.

Financial Analysis 4
Common size analysis of West Rock in 2017
 Income statement
It depicts that the gross profit of the company in 2017 is 18.44% of the sales. The operating
expenses of the company are 12.82% of sales. The common size analysis has shown that the
company has spent 10.96% amount as its selling and general administrative charges.
Therefore, the operating profit of West Rock is 5.62 % which is not considerably higher.
Also, it shows that the company has paid interest of 1.87% to its investors. Further, it has
paid a tax of 1.07% of the total revenue from sales. The overall net income after tax earned
by the company is 4.70%. Hence, the company is able to distribute 4.77% of its overall
income from sales to its common stockholders.
Income Statement
2017
Net Sales
14,859.7
0 100%
Cost of goods sold
12,119.5
0 81.56%
Gross profit 2,740.20 18.44%
Operating Expenses
Selling, General and Administrative Expenses 1629.2 10.96%
Pension expenses 32.6 0.22%
Impairment on land 46.7 0.31%
Restructuring cost 196.7 1.32%
Operating Profit 835.00 5.62%
Interest Expenses 277.7 1.87%
Income after interest 557.30 3.75%
Extra-ordinary gains 300.3 2.02%
Income from continuing operations before income
taxes 857.60 5.77%
Income Tax 159 1.07%
Income after tax 698.60 4.70%
Loss/Gain from discontinued operations
Consolidated net income (loss) 698.60 4.70%
Loss/ Gain of non-controlling interests 9.6 0.06%

Financial Analysis 5
Net income (loss) attributable to common stockholder 708.20 4.77%
 Balance sheet:
It shows that the company holds current assets of 17.90% of its total assets. However, it has
the total current liabilities of 12% of its total assets. This clearly shows that the company is
successful in maintaining the more balance in its current assets than its current liabilities. The
total shareholder equity of the company is 41.40% of its total assets of the company whereas
the total debt of the company is 58.60% of its total assets. This shows that company has to
face more financial leverage in 2017.
Balance sheet
2017
ASSETS
Current Assets
Cash and Cash Equivalents 298.1 1.19%
Restricted Cash 5.9 0.02%
Accounts Receivables 1886.8 7.52%
Inventories 1797.3 7.16%
Other current assets 329.2 1.31%
Assets held for sale 173.6 0.69%
Total current assets 4490.9 17.90%
Property plant and equipment 9118.3 36.34%
Goodwill 5528.3 22.03%
Intangibles 3329.3 13.27%
Other assets 2622.2 10.45%
Total Assets 25089 100.00%
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt. 608.7 2.43%
Accounts payable 1492.1 5.95%
Accrued compensation and benefits 416.7 1.66%
Other current liabilities 492.3 1.96%
Total current liabilities 3009.8 12.00%
Long-term debt due after one year 5946.1 23.70%
Deferred income taxes 3410.2 13.59%
Other long-term liabilities. 2332.1 9.30%
Other liabilities 4.7 0.02%

Financial Analysis 6
Total liabilities 14702.9 58.60%
Equity
Common Stock 2.5 0.01%
Capital in excess of par value 10624.9 42.35%
Retained earnings (deficit) 172.4 0.69%
Accumulated loss -457.3 -1.82%
Total stockholders’ equity 10342.5 41.22%
Non-controlling interest 43.6 0.17%
Total equity 10386.1 41.40%
Total Liabilities and Equity 25089 100.00%
Trend analysis of West Rock for 2017, 2016 and 2015
The gross profit of the company in 2017 is 18.44 % which is lesser than that of 2016 and
2015 where it was 19.47% and 19.22%. It shows the increasing trend. This is because of the
increased percentage of cost of goods sold in 2017 as compared to 2016 and 2015. However,
the operating profit of West Rock in 2017 is higher than that of 2016 because more operating
expenses were incurred in 2016 as compared to 2015 and 2017. The interest expense has also
increased in 2017. Further, the net profit of the company has been fluctuating since last 3
years and in 2017, West Rock has achieved a profitability of 4.77% which is higher than the
profits of last 3 years.
Du Pont Analysis:
It is an extended study of Return on equity of the company which helps in assessing the
profitability of the company. The ROE of West Rock in 2017 is higher than that of 2016 and
2015. It indicates that company has achieved higher returns for its shareholders.
Return on
Equity
Net Profit
Margin x
Financial
Leverage x
Asset Turnover
Ratio
Return on
Equity Net Profit x Total Assets x Sales

Financial Analysis 7
Sales Total Equity Total Assets
2017 698.60 x 25089 x 14,859.70
14,859.70 10386.1 25089
4.70% x 241.56% x 59.23%
6.73%
2016 154.80 x 23038.2 x 14,171.80
14,171.80 9830 23038.2
1.09% x 234.37% x 61.51%
1.57%
2015 501.20 x 11124.80 x 11,124.80
11,124.80 11783.9 25372.4
4.51% x 94.41% x 43.85%
1.86%
Financial Ratio analysis:
Intra firm:
The current ratio of West Rock has shown the declining trend since last 3 years and it show
that company is not efficiently utilising its current assets to manage its current liabilities.
Therefore, the liquidity position of the company is worsening since 2015. The declining
receivables turnover ratio since 2015 shows that the company is efficient enough in 2017 to
convert its credit sales into cash in minimum time. The net profit ratio is showing increasing
trend since 2015 and it indicates that the company is striving to maintain sound profitability
position. The financial leverage of the company has slightly increased in 2017 as depicted

Financial Analysis 8
from debt equity ratio and it shows that company has higher financial risk in 2017 as
compared to last 2 years (West Rock, 2016).
Liquidity 2017 2016 2015
Current Ratio Current Assets
$
4,490.90
1.4
9
$
3,912.60
1.7
9 4176
1.9
2
Current Liabilities
$
3,009.80
$
2,183.00 2178.6
Quick Ratio Quick Assets
$
2,693.60
0.8
9
$
2,274.40
1.0
4
$
2,415.00
1.1
1
Current Liabilities
$
3,009.80
$
2,183.00 2178.6
Efficiency
Inventory
Turnover
Ratio Cost Of Goods Sold
$
12,119.5
0
7.0
6
$
11,413.2
0
6.7
2
$
8,986.50
10.
21
Average Inventory 1717.75 1699.60 880.50
Receivables
Turnover
Ratio Net Sales
$
14,859.7
0
8.5
4
$
14,171.8
0
8.9
5
$
11,124.80
14.
12
Average Total
Receivables
$
1,739.50
$
1,583.80
$
787.70
Profitability
Return On
Equity
Net Income After
Preference
Dividends
$
708.20
6.8
2
%
$
-396.30
-
4.0
3%
$
516.50
4.3
8
%
Common Stock
Holder's Equity
$
10,386.1
0
$
9,830.00
$
11,783.90
Net Profit
Ratio Net Profit
$
698.60
4.7
0
%
$
154.80
1.0
9%
$
501.20
4.5
1
%
Net Sales
$
14,859.7
0
$
14,171.8
0
$
11,124.80

Financial Analysis 9
Solvency
Debt Ratio Total Debt
$
14,702.9
0
0.5
9
$
13,208.0
0
0.5
7
$
13,587.70
0.5
4
Total Assets
$
25,089.0
0
$
23,038.2
0
$
25,372.40
Debt To
Equity Ratio Total Debt
$
14,702.9
0
0.5
9
$
13,208.0
0
0.5
7
$
13,587.70
0.5
4
Total Equity
$
25,089.0
0
$
23,038.2
0
$
25,372.40
Valuation
Earnings Per
Share
Net Income After
Preference
Dividends
$
708.20
1.1
8
$
-396.30
-
0.6
6
$
516.50
0.8
6
Total Common
Stock
$
600.000
00
$
600.000
00
$
600.00000
Inter firm:
Comparison of West Rock’s financial results with its major competitor i.e. Packaging Corp
of America)
In liquidity terms Packaging Corp is better than that of West Rock because of its better
current ratio which shows that former company has enough current assets to meet its current
liabilities. Also, in profitability terms, Packaging Corp has superseded West Rock and its
observed from its higher net profit ratio. However, the solvency position and asset usage

Financial Analysis 10
efficiency position of the Parking Corp is not as better as West Rock as depicted by debt
equity and receivable turnover ratio of both the companies (West Rock, 2017).
Liquidity
Current Ratio
West Rock 1.49:1
Packaging Corp of
America 2.3:1
Profitability
ROE
West Rock 6.82%
Packaging Corp of
America 33.63%
Net profit
West Rock 4.70%
Packaging Corp of
America 10.29%
Solvency
West Rock 0.59
Packaging Corp of
America 1.15
Efficiency
Receivable Turnover
Ratio
West Rock 8.54 times
Packaging Corp of
America 8.42 times
Industry comparatives:
The average industry current ratio is 1.81:1 while the current ratio of the concerned company
is 1.49:1. It shows that the company is not able maintaining its liquidity position in the
market. The average industry ROE is 18.99% whereas the ROE of West Rock is 6.82%

Financial Analysis 11
which is significantly lower than the industry standards. The solvency position of the
company as depicted by the debt equity ratio of 59 % shows that the company is using less
external debt to finance its assets in comparison to its peers. Hence, it is less risky in relation
to its industry. Further, the industry average for the receivable turnover ratio is 8.94 times and
that of West Rock is 8.54 times. Thus, it can be said that the company is efficient to manage
its accounts receivables as per the industry standards.
Industry Comparatives
Industry
comparatives
West Rock
Financials
Liquidity
Current Ratio
West Rock 1.49
Packaging Corp of
America 2.3
Graphic Packaging
Holding Co 1.37
Matthews International
Corp 2.09
Average 1.81 1.49
Profitability
ROE
West Rock 6.82
Packaging Corp of
America 33.63
Graphic Packaging
Holding Co 25.57
Matthews International
Corp 9.93
Average 18.99 6.82
Net profit
West Rock 4.70
Packaging Corp of
America 10.29
Graphic Packaging
Holding Co 6.82
Matthews International
Corp 4.91
Average 6.68 4.70

Financial Analysis 12
Solvency
Debt Equity
West Rock 0.59
Packaging Corp of
America 1.15
Graphic Packaging
Holding Co 1.71
Matthews International
Corp 1.12
Average 1.14 0.59
Efficiency
Receivable Turnover
Ratio
West Rock 8.54
Packaging Corp of
America 8.42
Graphic Packaging
Holding Co 13.86
Matthews International
Corp 4.93
Average 8.94 8.54
Recommendations:
From the above analysis, it can be said that West Rock will have to improve its financial
position, especially in terms of profitability and liquidity to sustain in the market where there
is intense competition. This suggestion could be given considering the Net profit ratio, ROE
and the current ratio of the company which are quite lower than the industry benchmarks.
Reflective Writing:
From the above application of key tool of financial and accounting studies i.e. ratio analysis
tool, I have learnt the practical meanings of the different ratios. The practical implementation
of ratio analysis technique has helped us to understand as to how the financial performance of

Financial Analysis 13
any firm can be assessed using the financial results given in annual report of that particular
firm.
Conclusion:
The above report can be summarised by stating that the financial position of West Rock is not
sound as per the standards of the industry to which it belongs. However, it can be said
individually the firm is performing well in the current year i.e. 2017, particularly in terms of
its profitability and asset usage efficiency. However, the liquidity position of the company
cannot be said as satisfactory because of low current and quick ratio

Financial Analysis 14
References:
West Rock. (2016). Annual Report. Retrieved from
https://s21.q4cdn.com/975972157/files/doc_financials/annual/WRK_AnnualReport_2
016vF.pdf
West Rock. (2017). Annual Report. Retrieved from
http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_WRK_2017.
pdf