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Earnings per Share

9 Months Ended

Sep. 30, 2023

Earnings per Share

Earnings per Share

Note 18. Earnings per Share

Prior to the Conversion, the Company’s ownership interests consisted of two classes of equity units, referred to as Common Units and Common Equivalent Preferred Units (“CEP Units”), which have been retroactively adjusted as shares reflecting the conversion ratios discussed in Note 4.

Westrock Series A Preferred Shares and our RSUs issued under our 2022 Equity Incentive Plan are considered participating securities as they receive non-forfeitable rights to dividends at the same rate as Common Shares. As participating securities, we include these instruments in the computation of earnings per share under the two-class method described in ASC 260 Earnings per Share (“ASC 260”). As a result of the Company’s net income position for the three months ended September 30, 2023, a portion of our undistributed earnings have been allocated to participating securities in accordance with the provisions of ASC 260. Neither the Series A Preferred Shares nor the RSUs have a contractual obligation to share in losses of the Company. However, undistributed earnings are allocated to the participating securities.

Prior to the Conversion, the dilutive effect of CEP Units was calculated by using the “if-converted” method. This assumed an add-back of dividends on the CEP Units to net income attributable to shareholders as if the securities were converted to common shares at the beginning of the reporting period (or at the time of issuance, if later), and the resulting common shares were included in the number of weighted-average units outstanding.

The dilutive effect of Westrock Series A Preferred Shares is calculated using the if-converted method, which assumes an add-back of any accretion on preferred shares to net income attributable to shareholders as if the securities were converted to common shares at the beginning of the reporting period (or at the time of issuance, if later), and the resulting common shares being included in the number of weighted-average units outstanding.

The dilutive effect of time-based option awards and RSUs is calculated using the treasury stock method, while performance-based awards are treated as contingently issuable.

The following potentially dilutive securities were excluded from the computation of diluted shares for the periods indicated because their inclusion would have an anti-dilutive effect on dilutive earnings (loss) per common share.


		Three Months Ended September 30,						Nine Months Ended September 30,
(Thousands)		2023			2022			2023			2022
Warrants			19,144			19,900			19,151			19,900
Restricted stock			2,142			1,105			1,906			1,105
Options			—			1,623			1,472			1,623
If-converted securities			—			23,588			23,564			23,588

The following table sets forth the computation of basic and diluted earnings per share under the two-class method for the periods indicated.


		Three Months Ended September 30,						Nine Months Ended September 30,
(Thousands, except per share data)		2023			2022			2023			2022
Basic Earnings per Common Share
Numerator:
Net income (loss) attributable to common shareholders		$	12,802		$	(20,246)		$	(14,780)		$	(44,717)
Denominator:
Weighted-average common shares outstanding - basic			83,437			49,795			78,203			39,819
Basic earnings (loss) per common share		$	0.15		$	(0.41)		$	(0.19)		$	(1.12)

Diluted Earnings per Common Share
Numerator:
Net income (loss) attributable to common shareholders - basic		$	12,802		$	(20,246)		$	(14,780)		$	(44,717)
Effect of participating securities			3,493			—			—			—
Effect of non-participating securities			—			—			—			—
Net income (loss) attributable to common shareholders - diluted		$	16,295		$	(20,246)		$	(14,780)		$	(44,717)
Denominator:
Weighted-average common shares outstanding - basic			83,437			49,795			78,203			39,819
Effect of dilutive participating securities			23,542			—			—			—
Effect of dilutive non-participating securities			101			—			—			—
Weighted-average common shares outstanding - diluted			107,080			49,795			78,203			39,819

Dilutive earnings (loss) per common share		$	0.15		$	(0.41)		$	(0.19)		$	(1.12)