Rocket Companies 8-K Rock-Tenn Company Reports Third Quarter 2003 Results

EXHIBIT 99.1

Rock-Tenn Company Reports Third Quarter 2003 Results

Norcross, Ga., July 22, 2003 – Rock-Tenn Company (NYSE:RKT) today reported financial results for the fiscal third quarter ended June 30, 2003. Net sales for the fiscal third quarter of 2003 were $386.4 million compared to net sales of $357.1 million in the prior year quarter. Net income was $7.2 million, or $0.21 per diluted share, for the fiscal third quarter ended June 30, 2003, compared to net income of $5.5 million, or $0.16 per diluted share, in the comparable quarter of the prior fiscal year. Rock-Tenn Company’s net income in the fiscal third quarter of 2003 included a $0.7 million pre-tax charge related to restructuring and other costs compared to $9.8 million in the prior year quarter.

Chairman and Chief Executive Officer’s Statement

Rock-Tenn Company Chairman and Chief Executive Officer James A. Rubright stated, “Our earnings per diluted share of $0.21 was within the $0.20 to $0.25 guidance we gave at the beginning of the quarter. Folding carton sales were up 15.6% over last year and up 6% excluding the impact of the Cartem-Wilco acquisition. Merchandising display sales were up 9.5% over the prior year quarter. While our recycled paperboard mills operated at 95% utilization and our sales price increased by $26 per ton over the prior year quarter, our operating income declined primarily due to higher recovered fiber costs and much higher energy costs. During the quarter we paid off a $24.5 million synthetic lease financing, made a $22.7 million contribution to our pension plans, and funded capital expenditures of $12.3 million. Debt increased by $14.6 million.

“We believe that earnings for the fiscal year will be in the range of $0.85 to $0.90 per diluted share. We expect our capital expenditures for fiscal year 2003 to be between $60 to $65 million, consistent with our prior estimates. During fiscal year 2004 we expect capital expenditures also to be $60 to $65 million, which includes funding $15 million in growth projects in our folding carton business.”

Segment Results

Packaging Products Segment

Packaging Products segment sales increased 14.4% in the fiscal third quarter of 2003 to $228.3 million from $199.7 million in the fiscal third quarter of 2002. Packaging Products segment operating income was $9.5 million in the fiscal third quarter of 2003 compared to $14.6 million in the prior year quarter. Return on sales for the fiscal third quarter of 2003 decreased to 4.1% from 7.3% in the prior year quarter.

The increase in sales for the Packaging Products segment in the third quarter of 2003 was primarily due to higher volumes in folding carton sales, which increased 15.6% from the year ago period. The increase in the folding carton sales resulted from the Cartem-Wilco acquisition that was completed in January 2003 and internal growth. Folding carton operating income decreased from the prior year period due to continued pricing pressure in the current highly competitive environment and increased paperboard costs. These costs were somewhat offset by the operating income contributed by Cartem-Wilco. Interior packaging products sales increased by approximately 10% compared to the prior year quarter, although operating income declined slightly due to higher paperboard costs. Despite increased volumes compared to the comparable quarter of 2002, plastic packaging income declined due to higher resin prices and a shift in mix toward lower margin extruded roll stock sales.

Merchandising Displays and Corrugated Packaging Segment

Merchandising Displays and Corrugated Packaging segment sales increased $2.5 million from the prior year quarter to $70.5 million. Operating income for the segment increased 46% to $6.7 million in the third fiscal

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quarter of 2003 compared to $4.6 million in the comparable year ago quarter. Return on sales for the fiscal third quarter of 2003 was 9.5% compared to 6.7% in the prior year quarter.

The increase in sales for the segment was driven by a 9.5% increase in sales of merchandising displays.Operating income in the Merchandising Display division improved as margins returned to historically normal levels. Corrugated packaging sales declined due to the sale of the Dothan facility; sales at current locations increased by 1.2%.

Paperboard Segment

Paperboard segment sales increased 0.9% to $130.3 million in the fiscal third quarter of 2003 from $129.1 million in the same quarter of 2002, despite a decline in sales in the Company’s Laminated Paperboard Products division. Total tons shipped in the quarter for the Paperboard segment were 279,706 tons, a 0.1% increase from the 279,336 tons shipped in the same quarter last year. The Company’s recycled paperboard mills operated at 95% of capacity. Operating income in the segment was $5.6 million compared to $9.0 million the prior year period. The decline in operating income was caused primarily by continued weakness in demand for ready-to-assemble furniture components and competitive pricing for clay-coated recycled boxboard. Return on sales was 4.3% in the third quarter of 2003 compared to 7.0% in the third quarter of 2002.

Selling, General & Administrative Expenses

During the third quarter of 2003, selling, general and administrative expenses were $48.5 million compared to $49.0 million in the same quarter of last year due to cost reductions.

Capital Expenditures

Rock-Tenn Company’s capital expenditures for the quarter were $12.3 million, consistent with the Company’s expectation that capital expenditures will be approximately $60.0 to $65.0 million for the fiscal year. This amount does not include $24.5 million paid this quarter to purchase the assets that were previously part of a financing arrangement commonly referred to as a synthetic lease. The Company terminated this arrangement resulting in the addition of $24.5 million of land, buildings and improvements.

Financing

Rock-Tenn Company’s debt balance, excluding the fair value hedge adjustment of $24.3 million, at the end of the third quarter was $510.2 million compared to $495.5 million on March 31, 2003.

During the quarter, Rock-Tenn Company contributed an additional $22.7 million to its defined benefit pension plans. This contribution was not required to be made in this fiscal year.

Rock-Tenn Company realized $6.4 million cash proceeds by terminating interest rate swaps that were designated as fair value hedges of $100 million of its notes that expire in 2011.

Cautionary Statements

Statements herein regarding expected earnings of the Company, expected performance of the Company’s businesses, expected levels of demand, expected capital expenditures constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such statements are based on our current expectations and beliefs and are subject to certain risks and uncertainties that could cause actual results to differ materially from those contained in any forward looking statement. With respect to these

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statements, the Company has made assumptions regarding expected economic conditions, expected volumes and price levels of purchases by customers, raw material and energy costs, labor costs, the amount and timing of expected capital expenditures, including installation costs, project development and implementation costs, severance and other shutdown costs, restructuring costs, expected credit availability, expected year-end inventory levels and costs, competitive conditions in our businesses, and possible adverse actions of our customers, our competitors and suppliers. The forward-looking statements are subject to certain risks including, among others, that the foregoing assumptions are inaccurate. There are many factors that impact these forward-looking statements that cannot be predicted accurately. Actual results may vary materially from current expectations, in part because the Company manufactures most of its products against customer orders with short lead times and small backlogs, while earnings are currently dependent on volume due to price levels and fixed operating costs. Further, these forward-looking statements are subject to a number of general risks including, among others, decreases in demand for the Company’s products, increases in energy and raw material costs, reduced supply of raw materials, increases in capital equipment costs, fluctuations in selling prices, increased competition, and adverse changes in general market and industry conditions. Such risks are more particularly described in the Company’s filings with the Securities and Exchange Commission, including under the caption “Forward-looking Information and Risk Factors” in the Company’s Annual Report on Form 10-K for the most recently ended fiscal year. Management believes its estimates are reasonable; however, undue reliance should not be placed on such estimates, which are based on current expectations. The information contained herein speaks as of the date hereof and the Company does not undertake any obligation to update such information as future events unfold.

Conference Call

The Company will host a conference call to discuss its third quarter 2003 and other topics that may be raised during the discussion at 11:00 a.m., ET, on Tuesday, July 22. The conference call will be webcast and can be accessed, along with a copy of this press release and any other statistical information related to the conference call, at www.rocktenn.com.

Rock-Tenn Company is one of North America’s leading marketing and packaging solutions companies, with annual net sales of over $1.4 billion and over 70 manufacturing operations in the United States, Canada, Mexico and Chile.

Contact: Rock-Tenn Company
Steven C. Voorhees, Executive Vice President & Chief Financial Officer
David Rees, Investor Relations
770-448-2193

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ROCK-TENN COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

		FOR THE THREE MONTHS ENDED						FOR THE NINE MONTHS ENDED
		June 30,			June 30,			June 30,			June 30,
		2003			2002			2003			2002
NET SALES		$	386,367		$	357,142		$	1,101,350		$	1,055,828
Cost of Goods Sold			316,965			282,161			902,270			834,454
Gross Profit			69,402			74,981			199,080			221,374
Selling, General and Administrative Expenses			48,519			48,961			142,590			141,541
Restructuring and Other Costs			671			9,846			1,087			9,681
Income from Operations			20,212			16,174			55,403			70,152
Interest Expense			(7,379	)		(6,542	)		(20,408	)		(19,638	)
Interest and Other Income (Loss)			(50	)		33			58			401
Loss from Unconsolidated Joint Venture			(92	)		—			(376	)		(694	)
Minority Interest in Income of Consolidated Subsidiary			(849	)		(874	)		(2,371	)		(2,394	)
INCOME BEFORE INCOME TAXES			11,842			8,791			32,306			47,827
Provision for Income Taxes			4,630			3,320			12,694			18,573
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE			7,212			5,471			19,612			29,254
Cumulative Effect of a Change in Accounting Principle (Net of $2,368 Income Taxes)			—			—			—			(5,844	)
NET INCOME		$	7,212		$	5,471		$	19,612		$	23,410
Weighted Average Common Shares Outstanding-Diluted			34,726			34,694			34,619			34,301
Diluted Earnings Per Share:
	Income Before Cumulative Effect of a Change in Accounting Principle	$	.21		$	.16		$	.57		$	.85
	Cumulative Effect of a Change in Accounting Principle		—			—			—			(0.17	)
Diluted Earnings Per Share		$	.21		$	.16		$	.57		$	.68

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ROCK-TENN COMPANY
INDUSTRY SEGMENT INFORMATION
(UNAUDITED)
(IN THOUSANDS, EXCEPT TONNAGE DATA)

	FOR THE THREE MONTHS ENDED						FOR THE NINE MONTHS ENDED
	June 30,			June 30,			June 30,			June 30,
	2003			2002			2003			2002
NET SALES:
Packaging Products Segment	$	228,317		$	199,664		$	633,198		$	586,179
Merchandising Displays and Corrugated Packaging Segment		70,464			67,970			208,640			210,527
Paperboard Segment		130,307			129,094			384,185			377,918
Intersegment Eliminations		(42,721	)		(39,586	)		(124,673	)		(118,796	)
TOTAL		386,367			357,142			1,101,350			1,055,828
INCOME BEFORE TAXES:
Packaging Products Segment		9,458			14,605			24,382			38,989
Merchandising Displays and Corrugated Packaging Segment		6,672			4,569			18,652			23,807
Paperboard Segment		5,626			9,033			17,038			21,667
Segment Income		21,756			28,207			60,072			84,463
Restructuring and Other Costs		(671	)		(9,846	)		(1,087	)		(9,681	)
Other Non-Allocated Expense		(965	)		(2,187	)		(3,958	)		(5,324	)
Interest Expense		(7,379	)		(6,542	)		(20,408	)		(19,638	)
Interest and Other Income (Loss)		(50	)		33			58			401
Minority Interest in Income of Consolidated Subsidiary		(849	)		(874	)		(2,371	)		(2,394	)
TOTAL	$	11,842		$	8,791		$	32,306		$	47,827
Paperboard Shipped (in tons)		279,706			279,336			821,203			819,574

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ROCK-TENN COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

		FOR THE THREE MONTHS ENDED						FOR THE NINE MONTHS ENDED
		June 30,			June 30,			June 30,			June 30,
		2003			2002			2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	7,212		$	5,471		$	19,612		$	23,410
Items in income not affecting cash:
Depreciation and amortization			19,102			18,092			57,309			54,234
Deferred income taxes			16,070			1,108			17,172			5,869
Deferred compensation expense			227			127			569			704
Loss (gain) on disposal of property, plant and equipment			733			(396	)		(14	)		(713	)
Pension funding more than expense			(20,167	)		(123	)		(14,186	)		(2,261	)
Equity in loss from joint venture			92			—			376			694
Minority interest in income of consolidated subsidiary			849			874			2,371			2,394
Impairment loss and other non-cash items			(85	)		8,272			811			14,124
Net changes in operating assets and liabilities			(1,790	)		7,329			(10,169	)		(18,366	)
CASH PROVIDED BY OPERATING ACTIVITIES			22,243			40,754			73,851			80,089
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(12,324	)		(24,889	)		(44,317	)		(53,538	)
Purchase of synthetic lease assets			(24,500	)		—			(24,500	)		—
Cash paid for purchase of businesses			(1,199	)		(1,116	)		(66,419	)		(22,876	)
Cash contributed to joint venture			(75	)		(32	)		(312	)		(1,682	)
Proceeds from sale of property, plant and equipment			149			8,898			6,848			11,446
Decrease (increase) in unexpended industrial revenue bond proceeds			549			(1,554	)		1,376			(1,554	)
CASH USED FOR INVESTING ACTIVITIES			(37,400	)		(18,693	)		(127,324	)		(68,204	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of public notes			—			—			99,748			—
Net repayments to revolving credit facilities			(2,494	)		(16,300	)		(894	)		(4,300	)
Additions to debt			17,088			4,616			64,308			16,410
Repayments of debt			(970	)		(7,226	)		(107,288	)		(21,515	)
Proceeds from monetizing swap contracts			6,416			—			8,898			—
Debt issuance costs			(23	)		(86	)		(1,013	)		(156	)
Issuance of common stock			1,840			1,524			3,821			6,243
Purchases of common stock			—			(345	)		(1,313	)		(345	)
Cash dividends paid to shareholders			(2,761	)		(2,556	)		(8,269	)		(7,610	)
Distribution to minority interest			(1,120	)		(910	)		(2,380	)		(2,555	)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES			17,976			(21,283	)		55,618			(13,828	)
Effect of exchange rate changes on cash			(36	)		167			(500	)		1,007
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			2,783			945			1,645			(936	)
Cash and cash equivalents:
Beginning of period			5,422			3,310			6,560			5,191
End of period		$	8,205		$	4,255		$	8,205		$	4,255
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
	Income taxes (net of refunds)	$	1,015		$	1,956		$	8,205		$	19,065
	Interest (net of amounts capitalized)		2,322			1,352			14,615			15,300

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ROCK-TENN COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)

	JUNE 30,		MARCH 31,		SEPTEMBER 30,
	2003		2003		2002
ASSETS:
Cash and cash equivalents	$	8,205	$	5,422	$	6,560
Receivables — net		160,715		155,647		157,961
Inventories — at LIFO cost — net		131,444		123,909		111,749
Other current assets		28,770		13,993		11,691
TOTAL CURRENT ASSETS		329,134		298,971		287,961
Property, plant and equipment — net		618,434		595,891		572,087
Intangible and other assets		337,879		336,398		313,003
TOTAL ASSETS	$	1,285,447	$	1,231,260	$	1,173,051
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current maturities of debt	$	18,831	$	4,335	$	62,917
Other current liabilities		173,434		152,252		158,918
TOTAL CURRENT LIABILITIES		192,265		156,587		221,835
Long-term maturities of debt		491,321		491,173		390,323
Adjustment for fair value hedge		24,270		19,931		19,751
Total long-term debt		515,591		511,104		410,074
Deferred income taxes		107,248		90,942		84,345
Other long-term items		32,610		52,950		51,650
Shareholders’ equity		437,733		419,677		405,147
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,285,447	$	1,231,260	$	1,173,051

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Rock-Tenn Company Quarterly Statistics

Paperboard Group Operating Statistics

		1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Fiscal Year
Average Price Per Ton (a)
Coated & Specialty Paperboard (b)
	2001	$	448	$	445	$	430	$	428	$	438
	2002		424		410		410		425		417
	2003		435		420		438		—		—
Corrugated Medium
	2001		378		365		350		349		360
	2002		342		337		331		346		339
	2003		344		334		336		—		—
All Tons
	2001		436		433		417		414		425
	2002		410		398		397		413		405
	2003		421		407		423		—		—
Average Recovered
Paper Cost
	2001		74		68		66		67		69
	2002		67		65		78		108		80
	2003		82		78		88		—		—
Tons Shipped
Coated
	2001		118,799		119,624		117,576		125,952		481,951
	2002		125,382		117,813		117,724		126,625		487,544
	2003		117,566		128,606		126,292		—		—
Specialty(b)
	2001		97,913		102,732		109,086		104,717		414,448
	2002		98,538		112,408		117,652		114,367		442,965
	2003		99,752		113,299		113,001		—		—
Corrugated Medium
	2001		41,452		39,827		42,025		45,879		169,183
	2002		43,556		42,541		43,960		44,797		174,854
	2003		40,815		41,459		40,413		—		—
Total
	2001		258,164		262,183		268,687		276,548		1,065,582
	2002		267,476		272,762		279,336		285,789		1,105,363
	2003		258,133		283,364		279,706		—		—

^(a)The Average Recycled Paperboard and Corrugated Medium Prices represent the average gross sales price per manufactured ton shipped adjusted for volume discounts and freight billed or allowed. The Average Recycled Paperboard and Corrugated Medium Prices are not adjusted for payment discounts or sales returns and allowances. The Weighted Average Recovered Paper Cost represents the average cost of fiber per manufactured ton shipped, including related freight and brokerage costs.

^(b)Specialty Paperboard Average Price Per Ton and Tons Shipped include tons shipped by Seven Hills Paperboard LLC, our joint venture with LaFarge Corporation.

Note: First and second quarter 2003 sales price per ton numbers have been changed from prior disclosure to properly exclude volume discounts and freight billed or allowed.

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Rock-Tenn Company Quarterly Statistics

Segment Sales and Operating Income
(In Thousands)

			1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Fiscal Year
Packaging Products Segment
	Sales
		2001	$	195,575		$	206,918		$	198,618		$	204,996		$	806,107
		2002		194,511			192,004			199,664			204,031			790,210
		2003		191,410			213,471			228,317			—			—
	Income
		2001		10,799			11,719			12,777			12,779			48,074
		2002		11,554			12,830			14,605			11,499			50,488
		2003		4,859			10,065			9,458			—			—
	Return On Sales
		2001		5.5	%		5.7	%		6.4	%		6.2	%		6.0	%
		2002		5.9	%		6.7	%		7.3	%		5.6	%		6.4	%
		2003		2.5	%		4.7	%		4.1	%		—			—
Merchandising Displays and Corrugated Packaging Segment
	Sales
		2001	$	57,830		$	65,778		$	65,757		$	74,030		$	263,395
		2002		72,453			70,104			67,970			79,606			290,133
		2003		73,841			64,335			70,464			—			—
	Income
		2001		2,751			8,525			8,328			10,642			30,246
		2002		11,389			7,849			4,569			9,006			32,813
		2003		6,907			5,073			6,672			—			—
	Return on Sales
		2001		4.8	%		13.0	%		12.7	%		14.4	%		11.5	%
		2002		15.7	%		11.2	%		6.7	%		11.3	%		11.3	%
		2003		9.4	%		7.9	%		9.5	%		—			—
Paperboard Segment
	Sales
		2001	$	131,455		$	133,158		$	130,506		$	129,432		$	524,551
		2002		125,081			123,743			129,094			138,263			516,181
		2003		123,137			130,741			130,307			—			—
	Income
		2001		10,336			10,275			10,503			10,519			41,633
		2002		6,287			6,347			9,033			2,426			24,093
		2003		5,061			6,351			5,626			—			—
	Return on Sales
		2001		7.9	%		7.7	%		8.0	%		8.1	%		7.9	%
		2002		5.0	%		5.1	%		7.0	%		1.8	%		4.7	%
		2003		4.1	%		4.9	%		4.3	%		—			—

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Rock-Tenn Company Quarterly Statistics

Key Financial Statistics
(In Thousands except EPS Data)

		1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Fiscal Year
Income Before Cumulative Effect of a Change in Accounting Principle
	2001	$	4,505	$	7,318	$	9,120	$	9,294	$	30,237
	2002		12,199		11,584		5,471		3,216		32,470
	2003		5,070		7,330		7,212		—		—
Diluted EPS Before Cumulative Effect of a Change in Accounting Principle
	2001		0.13		0.22		0.27		0.28		0.90
	2002		0.36		0.34		0.16		0.09		0.94
	2003		0.15		0.21		0.21		—		—
Net Income
	2001		4,791		7,318		9,120		9,294		30,523
	2002		6,355		11,584		5,471		3,216		26,626
	2003		5,070		7,330		7,212		—		—
Diluted EPS
	2001		0.14		0.22		0.27		0.28		0.91
	2002		0.19		0.34		0.16		0.09		0.77
	2003		0.15		0.21		0.21		—		—
Depreciation & Amortization
	2001		19,262		19,002		19,662		19,667		77,593
	2002		17,759		18,383		18,092		18,287		72,521
	2003		19,419		18,788		19,102		—		—
Capital Expenditures
	2001		16,632		17,515		17,652		20,762		72,561
	2002		11,078		17,571		24,889		24,102		77,640
	2003		16,721		15,272		12,324		—		—

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