Exhibit 99.1
RockTenn Reports Record Earnings for the Fourth Quarter of Fiscal 2008 of $0.74 Per Share and Record Adjusted Earnings Per Share of $0.90, up 58% over Prior Year Quarter
NORCROSS, Ga.--(BUSINESS WIRE)--November 3, 2008--RockTenn (NYSE:RKT) today reported earnings for the quarter ended September 30, 2008 of $0.74 per diluted share. The Company’s adjusted earnings were $0.90 per diluted share, excluding specific items related to the Southern Container acquisition and other restructuring charges. Adjusted earnings per diluted share increased 58% over the prior year quarter adjusted earnings of $0.57 per diluted share.
| | | | | | | | |
| Three Months | | Three Months | | | Twelve Months | | Twelve Months |
| Ended | | Ended | | | Ended | | Ended |
| September 30, | | September 30, | | | September 30, | | September 30, |
| | 2008 | | 2007 | | | 2008 | | 2007 |
| | | | | | | | |
| Earnings per diluted share | $ | 0.74 | | $ | 0.50 | | | $ | 2.14 | | $ | 2.07 |
| | | | | | | | |
| Restructuring and other costs, net | | 0.14 | | | 0.04 | | | | 0.26 | | | 0.07 |
| Acquisition inventory step up | | 0.02 | | | — | | | | 0.21 | | | — |
| Solvay Mill expansion and upgrade | | — | | | — | | | | 0.06 | | | — |
| Acquisition bridge financing fee | | — | | | — | | | | 0.05 | | | — |
Debt extinguishment costs | | — | | | — | | | | 0.03 | | | — |
| Operating losses of previously closed facility | | — | | | — | | | | 0.02 | | | — |
| Capacity increase related outage at Battle Creek Mill | | — | | | 0.03 | | | | — | | | 0.03 |
| | | | | | | | | |
| Adjusted earnings per diluted share | $ | 0.90 | | $ | 0.57 | | | $ | 2.77 | | $ | 2.17 |
Fourth Quarter Results
- Net sales of $785.7 million for the fourth quarter of fiscal 2008 increased $180.9 million, or 30%, over the fourth quarter of fiscal 2007 due to increased net sales in each of our segments and the Southern Container acquisition.
- Segment income increased to $90.3 million compared to $54.5 million in the prior year quarter, a 66% increase over the prior year quarter.
- RockTenn’s pre-tax restructuring and other costs were $8.1 million, or $0.14 per diluted share after-tax, for the fourth quarter of fiscal 2008 primarily related to the closure of the Baltimore, Maryland folding carton plant and specific items related to the Southern Container acquisition. The Southern Container costs related to pre-tax acquisition related deferred compensation expense (“ESU Expense”) of $2.1 million, pre-tax integration expenses of $1.8 million and $2.3 million pre-tax related to corrugated plant closures.
- During the quarter, the Company adjusted the value assigned to the inventory acquired as part of the Southern Container acquisition. This adjustment increased the purchase accounting step up in value, which we then expensed in the fourth quarter resulting in a reduction of our fourth quarter of fiscal 2008 income of $1.3 million pre-tax.
Chairman and Chief Executive Officer’s Statement
RockTenn Chairman and Chief Executive Officer James A. Rubright stated, “RockTenn’s record earnings result from continued strong demand for our consumer packaging and paperboard and earnings accretion from the acquisition of Southern Container. With higher pricing and continued increases in productivity we were able to more than offset high commodity input costs. The costs of recycled fiber and natural gas have declined significantly from the average costs in the quarter, which should result in higher margins and cash flow generation in fiscal 2009.”
Segment Results
On July 15, 2008, we announced a realignment of operating responsibilities. Our results have been reclassified for all periods presented to reflect this realignment. The four business segments include the following: Consumer Packaging, consisting of our folding carton business and six coated paperboard mills; Corrugated Packaging, consisting of the Solvay and St. Paul containerboard mills and our corrugated converting operations; Merchandising Displays; and Specialty Paperboard Products, consisting of five uncoated paperboard mills, sixteen converting locations (including all RTS partition locations) and our recycled fiber procurement and trading activities.
Paperboard and Containerboard Tons Shipped and Average Price
Total tons shipped in the fourth quarter of fiscal 2008 increased by 206,706 tons over the prior year quarter, which includes 195,732 tons shipped by the Solvay containerboard mill acquired in the Southern Container acquisition. Bleached paperboard increased 2% over the prior year quarter to 90,724 and market pulp tons shipped decreased to 21,537 tons. The average selling price for all paperboard and containerboard grades decreased $11 per ton over the prior year quarter as higher paperboard and containerboard pricing was more than offset by the effect of the increased mix of lower priced containerboard following the Southern Container acquisition. Excluding the Solvay Mill, average recycled fiber costs decreased $4 per ton over the prior year quarter and energy increased $18 per ton of recycled paperboard. Fiber costs for bleached paperboard increased $31 per ton.
Consumer Packaging Segment
Consumer Packaging segment net sales were $393.0 million in the fourth quarter of fiscal 2008 compared to $376.1 million in the prior year quarter, due primarily to higher unit pricing in the fiscal 2008 quarter. Segment income decreased $3.6 million over the prior year quarter to $30.7 million in the fourth quarter of fiscal 2008 due primarily to higher energy, chemicals and fiber costs in our mills. Segment return on sales was 7.8% compared to 9.1% in the prior year quarter.
Corrugated Packaging Segment
Corrugated Packaging segment net sales increased $164.2 million over the prior year quarter to $225.2 million in the fourth quarter of fiscal 2008. The increase in segment net sales is due to the Southern Container acquisition, higher sales volumes in the acquired operations and higher pricing. Segment income was $39.4 million in the fourth quarter of fiscal 2008 and $3.1 million in the prior year quarter.
Merchandising Displays Segment
Merchandising Displays segment net sales increased $2.9 million, or 3%, over the prior year fourth quarter, to $88.4 million in the fourth quarter of fiscal 2008 on strong demand for promotional displays. Segment income increased $1.1 million compared to the prior year quarter as pricing, sales volumes and mix and operational improvements more than offset higher input costs.
Specialty Paperboard Products Segment
Specialty Paperboard Products segment net sales increased $2.9 million in the fourth quarter of fiscal 2008 from the prior year quarter to $99.2 million primarily due to higher selling prices and an increase in tons shipped. Segment income increased to $8.5 million compared to $6.5 million in the prior year quarter.
Cash Provided By Operating Activities
Net cash provided by operating activities in the fourth quarter of fiscal 2008 was $83.9 million compared to $97.3 million in the prior year quarter.
Financing and Investing Activities
During the fourth quarter of fiscal 2008, RockTenn decreased net debt by $61.6 million. RockTenn reduced its Credit Agreement Debt/EBITDA ratio during the quarter from 3.9 to 3.6 times for the twelve months ended September 30, 2008, exceeding its interim goal for rapid deleveraging following the Southern Container acquisition in March 2008. RockTenn has reduced its leverage ratio from 4.2 times pro forma for the acquisition to 3.6 times and reduced net debt by $150.5 million in the six months since March 31, 2008, from strong cash flows from its legacy operations and earnings and cash flow accretion from the Southern Container acquisition, which RockTenn estimates at an increase of $0.29 in adjusted earnings per diluted share for the quarter from the acquisition.
Conference Call
We will host a conference call to discuss our results of operations for the fourth quarter of fiscal 2008 and other topics that may be raised during the discussion at 9:30 a.m., Eastern Time, on November 4, 2008. The conference call will be webcast and can be accessed, along with a copy of this press release, at www.rocktenn.com.
About RockTenn
RockTenn (NYSE:RKT) is one of North America’s leading manufacturers of paperboard, containerboard, consumer and corrugated packaging and merchandising displays, with annual net sales of approximately $3.1 billion. We operate locations in the United States, Canada, Mexico, Chile and Argentina.
Cautionary Statements
Statements herein regarding, among others, the ability to realize announced price increases, the easing costs for recycled fiber and natural gas; our earnings growth and our ability to realize higher margins and cash flow generation constitute forward-looking statements within the meaning of the federal securities laws. These statements 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 statements, we have made assumptions regarding, among other things, expected economic, competitive and market conditions generally; expected volumes and price levels of purchases by customers; costs associated with facility closures; competitive conditions in our businesses and possible adverse actions of our customers, our competitors and suppliers. Management believes its assumptions are reasonable; however, undue reliance should not be placed on these estimates, which are based on current expectations. There are many factors that impact these forward-looking statements that we cannot predict accurately. Further, our business is subject to a number of general risks that would affect any such forward-looking statements including, among others, decreases in demand for our products; increases in energy, raw materials, shipping and capital equipment costs; reduced supply of raw materials; fluctuations in selling prices and volumes; intense competition; the potential loss of certain key customers; and adverse changes in general market and industry conditions. These risks are more particularly described in our filings with the Securities and Exchange Commission, including under the caption “Business―Forward-Looking Information” and “Risk Factors” in the our Annual Report on Form 10-K for the fiscal year ended September 30, 2007 and under “Item 1A. Risk Factors” in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008. The information contained in this release speaks as of the date hereof and we do not undertake any obligation to update this information as future events unfold.
| ROCK-TENN COMPANY |
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
| (UNAUDITED) |
| (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) |
| | | | | | | |
| | | | | | | | |
| | | | | | | |
| FOR THE THREE MONTHS ENDED | | FOR THE TWELVE MONTHS ENDED |
| September 30, | | September 30, | | September 30, | | September 30, |
| | 2008 | | | | 2007 | | | | 2008 | | | | 2007 | |
| | | | | | | | |
| | | | | | | |
| NET SALES | $ | 785.7 | | | $ | 604.8 | | | $ | 2,838.9 | | | $ | 2,315.8 | |
| | | | | | | |
| Cost of Goods Sold | | 621.2 | | | | 488.4 | | | | 2,296.8 | | | | 1,870.2 | |
| | | | | | | | |
| | | | | | | |
| Gross Profit | | 164.5 | | | | 116.4 | | | | 542.1 | | | | 445.6 | |
| Selling, General and Administrative Expenses | | 84.6 | | | | 68.6 | | | | 310.5 | | | | 259.1 | |
| Restructuring and Other Costs, net | | 8.1 | | | | 2.4 | | | | 15.6 | | | | 4.7 | |
| | | | | | | | |
| | | | | | | |
| Operating Profit | | 71.8 | | | | 45.4 | | | | 216.0 | | | | 181.8 | |
| Interest Expense | | (27.6 | ) | | | (12.7 | ) | | | (88.6 | ) | | | (49.8 | ) |
| Interest and Other Income (Expense), net | | 0.8 | | | | (0.2 | ) | | | 1.6 | | | | (1.3 | ) |
| Equity in Income (Loss) of Unconsolidated Entities | | 1.5 | | | | (0.2 | ) | | | 2.4 | | | | 1.1 | |
| Minority Interest in Income of | | | | | | | |
| Consolidated Subsidiaries | | (1.5 | ) | | | (1.0 | ) | | | (5.3 | ) | | | (4.8 | ) |
| | | | | | | | |
| | | | | | | |
| INCOME BEFORE INCOME TAXES | | 45.0 | | | | 31.3 | | | | 126.1 | | | | 127.0 | |
| | | | | | | |
| Income Tax Expense | | (16.6 | ) | | | (11.6 | ) | | | (44.3 | ) | | | (45.3 | ) |
| | | | | | | | |
| | | | | | | |
| NET INCOME | $ | 28.4 | | | $ | 19.7 | | | $ | 81.8 | | | $ | 81.7 | |
| | | | | | | | |
| | | | | | | |
| Weighted Average Common Shares | | | | | | | |
| Outstanding-Diluted | | 38.5 | | | | 39.2 | | | | 38.2 | | | | 39.5 | |
| | | | | | | | |
| | | | | | | |
| Diluted Earnings Per Share | $ | 0.74 | | | $ | 0.50 | | | $ | 2.14 | | | $ | 2.07 | |
| ROCK-TENN COMPANY |
| SEGMENT INFORMATION |
| (UNAUDITED) |
| (IN MILLIONS, EXCEPT TONNAGE DATA) |
| | | | | | | |
| | | | | | | | |
| | | | | | | |
| FOR THE THREE MONTHS ENDED | | FOR THE TWELVE MONTHS ENDED |
| September 30, | | September 30, | | September 30, | | September 30, |
| | 2008 | | | | 2007 | | | | 2008 | | | | 2007 | |
| | | | | | | | |
| | | | | | | |
| NET SALES: | | | | | | | |
| | | | | | | |
| Consumer Packaging Segment | $ | 393.0 | | | $ | 376.1 | | | $ | 1,551.4 | | | $ | 1,459.6 | |
| Corrugated Packaging Segment | | 225.2 | | | | 61.0 | | | | 607.5 | | | | 236.7 | |
| Merchandising Displays Segment | | 88.4 | | | | 85.5 | | | | 350.8 | | | | 305.8 | |
| Specialty Paperboard Products Segment | | 99.2 | | | | 96.3 | | | | 392.9 | | | | 361.7 | |
| Intersegment Eliminations | | (20.1 | ) | | | (14.1 | ) | | | (63.7 | ) | | | (48.0 | ) |
| | | | | | | | |
| | | | | | | |
| TOTAL NET SALES | $ | 785.7 | | | $ | 604.8 | | | $ | 2,838.9 | | | $ | 2,315.8 | |
| | | | | | | | |
| | | | | | | |
| SEGMENT INCOME: | | | | | | | |
| | | | | | | |
| Consumer Packaging Segment | $ | 30.7 | | | $ | 34.3 | | | $ | 119.8 | | | $ | 125.2 | |
| Corrugated Packaging Segment | | 39.4 | | | | 3.1 | | | | 71.3 | | | | 18.9 | |
| Merchandising Displays Segment | | 11.7 | | | | 10.6 | | | | 41.9 | | | | 38.8 | |
| Specialty Paperboard Products Segment | | 8.5 | | | | 6.5 | | | | 30.3 | | | | 28.8 | |
| | | | | | | | |
| | | | | | | |
| TOTAL SEGMENT INCOME | $ | 90.3 | | | $ | 54.5 | | | $ | 263.3 | | | $ | 211.7 | |
| | | | | | | | |
| | | | | | | |
| Restructuring and Other Costs, net | | (8.1 | ) | | | (2.4 | ) | | | (15.6 | ) | | | (4.7 | ) |
| Non-Allocated Expense | | (8.9 | ) | | | (6.9 | ) | | | (29.3 | ) | | | (24.1 | ) |
| Interest Expense | | (27.6 | ) | | | (12.7 | ) | | | (88.6 | ) | | | (49.8 | ) |
| Interest and Other Income (Expense), net | | 0.8 | | | | (0.2 | ) | | | 1.6 | | | | (1.3 | ) |
| Minority Interest in Income of | | | | | | | |
| Consolidated Subsidiaries | | (1.5 | ) | | | (1.0 | ) | | | (5.3 | ) | | | (4.8 | ) |
| | | | | | | | |
| | | | | | | |
| INCOME BEFORE INCOME TAXES | $ | 45.0 | | | $ | 31.3 | | | $ | 126.1 | | | $ | 127.0 | |
| | | | | | | | |
| | | | | | | |
| | | | | | | |
| Recycled Paperboard Shipped (in tons) | | 234,209 | | | | 223,527 | | | | 916,164 | | | | 893,138 | |
| Containerboard Shipped (in tons) | | 244,073 | | | | 46,793 | | | | 609,396 | | | | 182,931 | |
| Bleached Paperboard Shipped (in tons) | | 90,724 | | | | 88,730 | | | | 341,531 | | | | 335,005 | |
| Pulp Shipped (in tons) | | 21,537 | | | | 24,787 | | | | 95,036 | | | | 95,882 | |
| ROCK-TENN COMPANY |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (UNAUDITED) |
| (IN MILLIONS) |
| | | | | | | | | | | |
| | | | | | | | | | |
| FOR THE THREE MONTHS ENDED | | FOR THE TWELVE MONTHS ENDED |
| September 30, | | September 30, | | September 30, | | September 30, |
| | 2008 | | | 2007 | | | | | 2008 | | | 2007 | |
| | | | | | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | | |
| Net income | $ | 28.4 | | | $ | 19.7 | | | | | $ | 81.8 | | | $ | 81.7 | |
| | | | | | | | | | |
| Items in income not affecting cash: | | | | | | | | | | |
| Depreciation and amortization | | 38.7 | | | | 26.2 | | | | | | 135.3 | | | | 103.7 | |
| Deferred income tax expense | | 10.9 | | | | 10.4 | | | | | | 10.5 | | | | 22.2 | |
| Share-based compensation expense | | 2.0 | | | | 2.0 | | | | | | 9.2 | | | | 7.3 | |
| (Gain) loss on disposal of plant and equipment and other, net | | 0.3 | | | | 0.4 | | | | | | (0.4 | ) | | | 0.9 | |
| Minority interest in income of consolidated subsidiaries | | 1.5 | | | | 1.0 | | | | | | 5.3 | | | | 4.8 | |
| Equity in (income) loss of unconsolidated entities | | (1.5 | ) | | | 0.2 | | | | | | (2.4 | ) | | | (1.1 | ) |
| Proceeds from (payment on) termination of cash flow interest rate hedges | | | | | | | | | | |
| - | | | | (0.5 | ) | | | | | 6.9 | | | | (0.7 | ) |
| Pension funding (more) less than expense | | 2.2 | | | | 3.7 | | | | | | (7.1 | ) | | | (7.5 | ) |
| Impairment adjustments and other non-cash items | | 2.5 | | | | 1.0 | | | | | | 2.8 | | | | 2.0 | |
| Changes in operating assets and liabilities, net of acquisitions | | | | | | | | | | |
| Accounts receivable | | (9.5 | ) | | | 6.1 | | | | | | (25.3 | ) | | | 3.4 | |
| Inventories | | (2.9 | ) | | | (3.9 | ) | | | | | 2.2 | | | | (2.6 | ) |
| Other assets | | 3.5 | | | | 5.0 | | | | | | 1.1 | | | | 3.0 | |
| Accounts payable | | 13.8 | | | | 28.3 | | | | | | 32.8 | | | | 18.7 | |
| Income taxes payable | | (1.9 | ) | | | (3.9 | ) | | | | | (0.2 | ) | | | (4.3 | ) |
| Accrued liabilities and other | | (4.1 | ) | | | 1.6 | | | | | | (11.6 | ) | | | 6.8 | |
| | | | | | | | | | | |
| NET CASH PROVIDED BY OPERATING ACTIVITIES | $ | 83.9 | | | $ | 97.3 | | | | | $ | 240.9 | | | $ | 238.3 | |
| | | | | | | | | | |
| INVESTING ACTIVITIES: | | | | | | | | | | |
| | | | | | | | | | |
| Capital expenditures | | (24.5 | ) | | | (19.3 | ) | | | | | (84.2 | ) | | | (78.0 | ) |
| Cash paid for purchase of businesses, net of cash received | | - | | | | - | | | | | | (817.9 | ) | | | (32.1 | ) |
| Investment in unconsolidated entities | | (0.1 | ) | | | (0.1 | ) | | | | | (0.3 | ) | | | (9.6 | ) |
| Return of capital from unconsolidated entities | | 0.2 | | | | 0.2 | | | | | | 0.8 | | | | 6.5 | |
| Proceeds from sale of property, plant and equipment | | 0.1 | | | | 0.2 | | | | | | 6.4 | | | | 2.8 | |
| Proceeds from property, plant and equipment insurance settlement | | - | | | | - | | | | | | - | | | | 1.3 | |
| | | | | | | | | | | |
| NET CASH USED FOR INVESTING ACTIVITIES | $ | (24.3 | ) | | $ | (19.0 | ) | | | | $ | (895.2 | ) | | $ | (109.1 | ) |
| | | | | | | | | | |
| FINANCING ACTIVITIES: | | | | | | | | | | |
| | | | | | | | | | |
| Proceeds from issuance of notes | | - | | | | - | | | | | | 198.6 | | | | - | |
| Additions to revolving credit facilities | | 3.7 | | | | 21.5 | | | | | | 206.0 | | | | 68.1 | |
| Repayments of revolving credit facilities | | (43.4 | ) | | | (19.4 | ) | | | | | (238.7 | ) | | | (91.9 | ) |
| Additions to debt | | - | | | | - | | | | | | 764.0 | | | | 22.1 | |
| Repayments of debt | | (22.3 | ) | | | (15.3 | ) | | | | | (192.2 | ) | | | (85.1 | ) |
| Debt issuance costs | | (0.6 | ) | | | - | | | | | | (27.1 | ) | | | - | |
| Restricted cash and investments | | - | | | | - | | | | | | (0.4 | ) | | | - | |
| Issuances of common stock | | 1.9 | | | | (56.9 | ) | | | | | 4.3 | | | | (27.2 | ) |
| Excess tax benefits from share-based compensation | | 0.8 | | | | (0.3 | ) | | | | | 1.8 | | | | 14.1 | |
| Advances from (repayments to) unconsolidated entity | | 0.2 | | | | 0.5 | | | | | | 0.7 | | | | (5.4 | ) |
| Cash dividends paid to shareholders | | (3.8 | ) | | | (4.0 | ) | | | | | (15.2 | ) | | | (15.4 | ) |
| Cash distributions to minority interest | | - | | | | (1.5 | ) | | | | | (5.3 | ) | | | (4.2 | ) |
| | | | | | | | | | | |
| NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES | $ | (63.5 | ) | | $ | (75.4 | ) | | | | $ | 696.5 | | | $ | (124.9 | ) |
| | | | | | | | | | |
| Effect of exchange rate changes on cash and cash equivalents | | (0.2 | ) | | | (0.1 | ) | | | | | (0.3 | ) | | | (0.3 | ) |
| | | | | | | | | | |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $ | (4.1 | ) | | $ | 2.8 | | | | | $ | 41.9 | | | $ | 4.0 | |
| | | | | | | | | | |
| Cash and cash equivalents at beginning of period | | 56.9 | | | | 8.1 | | | | | | 10.9 | | | | 6.9 | |
| | | | | | | | | | | |
| | | | | | | | | | |
| Cash and cash equivalents at end of period | $ | 52.8 | | | $ | 10.9 | | | | | $ | 52.8 | | | $ | 10.9 | |
| | | | | | | | | | | |
| | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | |
| Cash paid during the period for: | | | | | | | | | | |
| Income taxes, net of refunds | $ | 7.7 | | | $ | 5.3 | | | | | $ | 31.4 | | | $ | 13.1 | |
| Interest, net of amounts capitalized | | 41.0 | | | | 19.4 | | | | | | 82.5 | | | | 54.4 | |
| ROCK-TENN COMPANY |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| (UNAUDITED) |
| (IN MILLIONS) |
| | | | |
| | | |
| September 30, | June 30, | September 30, |
| | 2008 | | | 2008 | | | 2007 | |
| | | | |
| | | |
| ASSETS | |
| CURRENT ASSETS: | | | |
| Cash and cash equivalents | $ | 52.8 | | $ | 56.9 | | $ | 10.9 | |
Restricted cash and marketable debt securities | | 19.2 | | | 7.8 | | | - | |
| Accounts receivable, net | | 304.3 | | | 296.8 | | | 230.6 | |
| Inventories | | 283.0 | | | 279.0 | | | 224.4 | |
| Other current assets | | 49.2 | | | 34.0 | | | 26.8 | |
| Assets held for sale | | 0.7 | | | - | | | 1.8 | |
| | | | |
| | | |
| TOTAL CURRENT ASSETS | | 709.2 | | | 674.5 | | | 494.5 | |
| | | | |
| | | |
| Property, plant and equipment at cost: | | | |
| Land and buildings | | 398.3 | | | 392.5 | | | 274.8 | |
| Machinery and equipment | | 1,826.2 | | | 1,818.3 | | | 1,368.6 | |
| Transportation equipment | | 15.2 | | | 18.3 | | | 10.8 | |
| Leasehold improvements | | 7.6 | | | 6.9 | | | 5.9 | |
| | 2,247.3 | | | 2,236.0 | | | 1,660.1 | |
| Less accumulated depreciation and amortization | | (914.2 | ) | | (888.7 | ) | | (822.6 | ) |
| Net property, plant and equipment | | 1,333.1 | | | 1,347.3 | | | 837.5 | |
| Goodwill | | 727.0 | | | 737.3 | | | 364.5 | |
| Intangibles, net | | 176.9 | | | 183.6 | | | 67.6 | |
| Investment in unconsolidated entities | | 29.4 | | | 31.1 | | | 28.9 | |
| Restricted cash and marketable debt securities | | - | | | 11.4 | | | - | |
| Other assets | | 37.5 | | | 38.4 | | | 7.7 | |
| | | | |
| | | |
| TOTAL ASSETS | $ | 3,013.1 | | $ | 3,023.6 | | $ | 1,800.7 | |
| | | | |
| | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| CURRENT LIABILITES: | | | |
| Current portion of debt | $ | 245.1 | | $ | 247.2 | | $ | 46.0 | |
| Accounts payable | | 241.5 | | | 239.5 | | | 161.6 | |
| Accrued compensation and benefits | | 95.2 | | | 76.6 | | | 73.8 | |
| Other current liabilities | | 65.9 | | | 73.2 | | | 63.5 | |
| | | | |
| | | |
| TOTAL CURRENT LIABILITIES | | 647.7 | | | 636.5 | | | 344.9 | |
| | | | |
| | | |
| Long-term debt due after one year | | 1,447.2 | | | 1,510.8 | | | 667.8 | |
| Hedge adjustments resulting from terminated fair value interest rate derivatives or swaps | | | |
| 6.6 | | | 7.1 | | | 8.5 | |
| | | | |
| | | |
| TOTAL LONG-TERM DEBT | | 1,453.8 | | | 1,517.9 | | | 676.3 | |
| | | | |
| | | |
| Accrued pension and other long-term benefits | | 70.8 | | | 36.9 | | | 47.3 | |
| Deferred income taxes | | 153.3 | | | 150.4 | | | 125.7 | |
| Other long-term liabilities | | 29.4 | | | 25.7 | | | 7.6 | |
| Minority interest | | 17.6 | | | 16.1 | | | 9.9 | |
| | | |
| Shareholders' equity | | 640.5 | | | 640.1 | | | 589.0 | |
| | | | |
| | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 3,013.1 | | $ | 3,023.6 | | $ | 1,800.7 | |
| Rock-Tenn Company Quarterly Statistics |
| | | | | | | | | |
| Paperboard and Containerboard Operating Statistics |
| | | | | | | | | |
| 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | | Fiscal Year |
| | | | | | | | | |
| Average Price Per Ton (a) (b) | | | | | | | | | |
| | | | | | | | | |
| All Tons | | | | | | | | | |
| 2006 | $ | 524 | | $ | 526 | | $ | 539 | | $ | 561 | | $ | 538 |
| 2007 | | 558 | | | 571 | | | 588 | | | 596 | | | 578 |
| 2008 | | 599 | | | 587 | | | 566 | | | 585 | | | 583 |
| | | | | | | | | |
| Tons Shipped | | | | | | | | | |
| Recycled Paperboard (a) (c) | | | | | | | | | |
| 2006 | | 208,325 | | | 223,469 | | | 220,596 | | | 229,086 | | | 881,476 |
| 2007 | | 221,506 | | | 222,970 | | | 225,135 | | | 223,527 | | | 893,138 |
| 2008 | | 217,081 | | | 229,003 | | | 235,871 | | | 234,209 | | | 916,164 |
| | | | | | | | | |
| Containerboard (d) | | | | | | | | | |
| 2006 | | 44,985 | | | 45,444 | | | 44,165 | | | 47,045 | | | 181,639 |
| 2007 | | 44,615 | | | 46,219 | | | 45,304 | | | 46,793 | | | 182,931 |
| 2008 | | 44,699 | | | 102,092 | | | 218,532 | | | 244,073 | | | 609,396 |
| | | | | | | | | |
| Bleached Paperboard | | | | | | | | | |
| 2006 | | 79,152 | | | 80,719 | | | 76,579 | | | 83,799 | | | 320,249 |
| 2007 | | 73,968 | | | 82,205 | | | 90,102 | | | 88,730 | | | 335,005 |
| 2008 | | 79,623 | | | 84,916 | | | 86,268 | | | 90,724 | | | 341,531 |
| | | | | | | | | |
| Market Pulp | | | | | | | | | |
| 2006 | | 14,994 | | | 27,911 | | | 23,645 | | | 20,019 | | | 86,569 |
| 2007 | | 20,883 | | | 24,661 | | | 25,551 | | | 24,787 | | | 95,882 |
| 2008 | | 21,193 | | | 27,837 | | | 24,469 | | | 21,537 | | | 95,036 |
| | | | | | | | | |
| Total (a) (d) | | | | | | | | | |
| 2006 | | 347,456 | | | 377,543 | | | 364,985 | | | 379,949 | | | 1,469,933 |
| 2007 | | 360,972 | | | 376,055 | | | 386,092 | | | 383,837 | | | 1,506,956 |
| 2008 | | 362,596 | | | 443,848 | | | 565,140 | | | 590,543 | | | 1,962,127 |
| | | | | | | | | |
| | | | | | | | | |
| (a) Average Price Per Ton and Tons Shipped include tons shipped by Seven Hills Paperboard LLC, our unconsolidated joint venture with Lafarge North America, Inc. |
| |
| (b) Beginning in the second quarter of fiscal 2008, Average Price Per Ton includes coated and specialty recycled paperboard, containerboard, bleached paperboard and market pulp. |
| |
| (c) Recycled paperboard tons shipped include coated and specialty paperboard. |
| |
| (d) Containerboard tons shipped include corrugated medium and linerboard, which include the Solvay Mill tons beginning in March 2008. |
| Rock-Tenn Company Quarterly Statistics |
| | | | | |
| Segment Sales and Segment Income |
| (In Millions) |
| | | | | |
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Fiscal Year |
| Consumer Packaging Segment Sales | | | | | |
| 2006 | $ | 333.7 | | $ | 355.3 | | $ | 359.5 | | $ | 367.1 | | $ | 1,415.6 | |
| 2007 | | 346.8 | | | 363.7 | | | 373.0 | | | 376.1 | | | 1,459.6 | |
| 2008 | | 374.7 | | | 394.8 | | | 388.9 | | | 393.0 | | | 1,551.4 | |
| Consumer Packaging Segment Income | | | | | |
| 2006 | $ | 1.0 | | $ | 19.6 | | $ | 23.0 | | $ | 31.1 | | $ | 74.7 | |
| 2007 | | 24.3 | | | 29.7 | | | 36.9 | | | 34.3 | | | 125.2 | |
| 2008 | | 28.7 | | | 32.5 | | | 27.9 | | | 30.7 | | | 119.8 | |
| Return On Sales | | | | | |
| 2006 | | 0.3 | % | | 5.5 | % | | 6.4 | % | | 8.5 | % | | 5.3 | % |
| 2007 | | 7.0 | % | | 8.2 | % | | 9.9 | % | | 9.1 | % | | 8.6 | % |
| 2008 | | 7.7 | % | | 8.2 | % | | 7.2 | % | | 7.8 | % | | 7.7 | % |
| | | | | |
| Corrugated Packaging Segment Sales | | | | | |
| 2006 | $ | 43.2 | | $ | 47.0 | | $ | 54.1 | | $ | 58.5 | | $ | 202.8 | |
| 2007 | | 56.2 | | | 59.3 | | | 60.2 | | | 61.0 | | | 236.7 | |
| 2008 | | 61.4 | | | 112.0 | | | 208.9 | | | 225.2 | | | 607.5 | |
| Corrugated Packaging Segment Income | | | | | |
| 2006 | $ | 0.4 | | $ | 2.2 | | $ | 3.1 | | $ | 4.8 | | $ | 10.5 | |
| 2007 | | 6.0 | | | 5.8 | | | 4.0 | | | 3.1 | | | 18.9 | |
| 2008 | | 4.3 | | | 4.4 | | | 23.2 | | | 39.4 | | | 71.3 | |
| Return on Sales | | | | | |
| 2006 | | 0.9 | % | | 4.7 | % | | 5.7 | % | | 8.2 | % | | 5.2 | % |
| 2007 | | 10.7 | % | | 9.8 | % | | 6.6 | % | | 5.1 | % | | 8.0 | % |
| 2008 | | 7.0 | % | | 3.9 | % | | 11.1 | % | | 17.5 | % | | 11.7 | % |
| | | | | |
| Merchandising Displays Segment Sales | | | | | |
| 2006 | $ | 49.2 | | $ | 55.8 | | $ | 58.8 | | $ | 69.4 | | $ | 233.2 | |
| 2007 | | 60.9 | | | 82.6 | | | 76.8 | | | 85.5 | | | 305.8 | |
| 2008 | | 82.0 | | | 94.3 | | | 86.1 | | | 88.4 | | | 350.8 | |
| Merchandising Displays Segment Income | | | | | |
| 2006 | $ | 2.9 | | $ | 3.2 | | $ | 1.6 | | $ | 8.8 | | $ | 16.5 | |
| 2007 | | 5.2 | | | 12.1 | | | 10.9 | | | 10.6 | | | 38.8 | |
| 2008 | | 8.0 | | | 13.8 | | | 8.4 | | | 11.7 | | | 41.9 | |
| Return on Sales | | | | | |
| 2006 | | 5.9 | % | | 5.7 | % | | 2.7 | % | | 12.7 | % | | 7.1 | % |
| 2007 | | 8.5 | % | | 14.6 | % | | 14.2 | % | | 12.4 | % | | 12.7 | % |
| 2008 | | 9.8 | % | | 14.6 | % | | 9.8 | % | | 13.2 | % | | 11.9 | % |
| | | | | |
| Specialty Paperboard Products Segment Sales | | | | | |
| 2006 | $ | 75.0 | | $ | 81.2 | | $ | 85.6 | | $ | 85.7 | | $ | 327.5 | |
| 2007 | | 79.5 | | | 91.9 | | | 94.0 | | | 96.3 | | | 361.7 | |
| 2008 | | 91.8 | | | 99.8 | | | 102.1 | | | 99.2 | | | 392.9 | |
Specialty Paperboard Products Segment Income | | | | | |
| 2006 | $ | 4.9 | | $ | 8.6 | | $ | 7.3 | | $ | 6.1 | | $ | 26.9 | |
| 2007 | | 7.3 | | | 7.2 | | | 7.8 | | | 6.5 | | | 28.8 | |
| 2008 | | 7.4 | | | 6.6 | | | 7.8 | | | 8.5 | | | 30.3 | |
| Return on Sales | | | | | |
| 2006 | | 6.5 | % | | 10.6 | % | | 8.5 | % | | 7.1 | % | | 8.2 | % |
| 2007 | | 9.2 | % | | 7.8 | % | | 8.3 | % | | 6.7 | % | | 8.0 | % |
| 2008 | | 8.1 | % | | 6.6 | % | | 7.6 | % | | 8.6 | % | | 7.7 | % |
| Rock-Tenn Company Quarterly Statistics | | | | | | | | |
| | | | | | | | | |
| Key Financial Statistics | | | | | | | | | |
| (In Millions, except EPS Data) | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | | Fiscal Year |
| | | | | | | | | |
| Net Income (Loss) | | | | | | | | | |
| 2006 | $ | (9.0 | ) | | $ | 5.2 | | $ | 11.0 | | $ | 21.5 | | $ | 28.7 |
| 2007 | | 15.1 | | | | 21.7 | | | 25.2 | | | 19.7 | | | 81.7 |
| 2008 | | 17.5 | | | | 17.1 | | | 18.8 | | | 28.4 | | | 81.8 |
| | | | | | | | | |
| Diluted EPS | | | | | | | | | |
| 2006 | $ | (0.25 | ) | | $ | 0.14 | | $ | 0.30 | | $ | 0.57 | | $ | 0.77 |
| 2007 | | 0.39 | | | | 0.55 | | | 0.63 | | | 0.50 | | | 2.07 |
| 2008 | | 0.46 | | | | 0.45 | | | 0.49 | | | 0.74 | | | 2.14 |
| | | | | | | | | |
| Depreciation & Amortization | | | | | | | | | |
| 2006 | $ | 25.8 | | | $ | 25.9 | | $ | 26.1 | | $ | 26.5 | | $ | 104.3 |
| 2007 | | 26.0 | | | | 25.5 | | | 26.0 | | | 26.2 | | | 103.7 |
| 2008 | | 25.8 | | | | 31.6 | | | 39.2 | | | 38.7 | | | 135.3 |
| | | | | | | | | |
| Capital Expenditures | | | | | | | | | |
| 2006 | $ | 13.5 | | | $ | 13.6 | | $ | 19.1 | | $ | 18.4 | | $ | 64.6 |
| 2007 | | 17.3 | | | | 23.5 | | | 17.9 | | | 19.3 | | | 78.0 |
| 2008 | | 17.9 | | | | 19.3 | | | 22.5 | | | 24.5 | | | 84.2 |
Non-GAAP Measures and Reconciliations
We have included financial measures that are not prepared in accordance with GAAP. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Below, we define the non-GAAP financial measures, provide a reconciliation of each non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP, and discuss the reasons that we believe this information is useful to management and may be useful to investors. These measures may differ from similarly captioned measures of other companies in our industry. The following non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such.
Net Debt
We have defined the non-GAAP measure “net debt” to include the aggregate debt obligations reflected in our consolidated balance sheet, less the hedge adjustments resulting from terminated fair value interest rate derivatives or swaps, the balance of our cash and cash equivalents, restricted cash (which includes restricted cash and marketable debt securities) and certain other investments that we consider to be readily available to satisfy these debt obligations.
Our management uses net debt, along with other factors, including net debt reduction per share, to evaluate our financial condition. We believe that net debt is an appropriate supplemental measure of financial condition because it provides a more complete understanding of our financial condition before the impact of our decisions regarding the appropriate use of cash and liquid investments and net debt reduction per share provides a measure to investors of how successful we are at achieving our debt reduction. Set forth below is a reconciliation of net debt to the most directly comparable GAAP measures, Current Portion of Debt and Total Long-Term Debt:
| (In Millions) | September 30, | | June 30, | | March 31, |
| | 2008 | | | | 2008 | | | | 2008 | |
| | | | | |
| Current Portion of Debt | $ | 245.1 | | | $ | 247.2 | | | $ | 247.7 | |
| Total Long-Term Debt | | 1,453.8 | | | | 1,517.9 | | | | 1,606.8 | |
| | 1,698.9 | | | | 1,765.1 | | | | 1,854.5 | |
| Less: Hedge Adjustments Resulting From Terminated | | | | | |
| Fair Value Interest Rate Derivatives or Swaps | | (6.6 | ) | | | (7.1 | ) | | | (7.6 | ) |
| | 1,692.3 | | | | 1,758.0 | | | | 1,846.9 | |
| Less: Cash and Cash Equivalents | | (52.8 | ) | | | (56.9 | ) | | | (56.6 | ) |
| Less: Restricted Cash | | (19.2 | ) | | | (19.2 | ) | | | (19.5 | ) |
| Net Debt | $ | 1,620.3 | | | $ | 1,681.9 | | | $ | 1,770.8 | |
| | | | | |
| Shares Outstanding at September 30, 2008 | | 38.2 | | | | | |
| | | Net Debt | | |
| | | Reduction | | |
| | | Per Share | | |
| Net Debt Reduction in Quarter | $ | 61.6 | | | $ | 1.61 | | | |
| Net Debt Reduction since March 31, 2008 | $ | 150.5 | | | $ | 3.94 | | | |
Credit Agreement EBITDA and Total Funded Debt
“Credit Agreement EBITDA” is calculated in accordance with the definition contained in our Senior Credit Facility. Credit Agreement EBITDA is generally defined as Consolidated Net Income plus: consolidated interest expense, income taxes of the consolidated companies determined in accordance with GAAP, depreciation and amortization expense of the consolidated companies determined in accordance with GAAP, certain non-cash and cash charges incurred, and charges taken resulting from the impact of changes to accounting rules related to the expensing of stock options.
“Total Funded Debt” is calculated in accordance with the definition contained in our Senior Credit Facility. Total Funded Debt is generally defined as aggregate debt obligations reflected in our balance sheet, less the hedge adjustments resulting from terminated and existing fair value interest rate derivatives or swaps, less certain deferred cash, plus additional outstanding letters of credit not already reflected in debt and certain guarantees.
Our management uses Credit Agreement EBITDA and Total Funded Debt to evaluate compliance with our debt covenants and borrowing capacity available under our Senior Credit Facility. Management believes that investors also use these measures to evaluate our compliance with our debt covenants and available borrowing capacity. Borrowing capacity is dependent upon, in addition to other measures, the “Credit Agreement Debt/EBITDA ratio” or the “Leverage Ratio,” which is defined as Total Funded Debt divided by Credit Agreement EBITDA. As of the September 30, 2008 calculation, our Leverage Ratio was 3.6 times, which compares to a maximum Leverage Ratio under the Senior Credit Facility of 5.00 times. On October 1, 2008, the maximum Leverage Ratio decreased to 4.75 times.
Set forth below is a reconciliation of Credit Agreement EBITDA for the twelve months ended September 30, 2008, to the most directly comparable GAAP measure, Net Income:
| (In Millions) | RockTenn | | Southern Container (1) | | Total |
| | | | | |
| Net Income | $ | 81.8 | | $ | 24.1 | | $ | 105.9 |
| Interest Expense, net | | 86.9 | | | 4.7 | | | 91.6 |
| Income Taxes | | 44.3 | | | 2.1 | | | 46.4 |
| Depreciation and Amortization | | 135.3 | | | 21.1 | | | 156.4 |
| Additional Permitted Charges | | 30.7 | | | 27.5 | | | 58.2 |
| | | | | |
| Credit Agreement EBITDA | $ | 379.0 | | $ | 79.5 | | $ | 458.5 |
| | | | | | | | |
(1) The Southern Container column represents the pre-acquisition results for the twenty-six weeks ended March 1, 2008 in order to include Southern Container for the full fiscal year. |
Set forth below is a reconciliation of Credit Agreement EBITDA for the three months ended September 30, 2008, to the most directly comparable GAAP measure, Net Income:
| (In Millions) | RockTenn |
| |
| Net Income | $ 28.4 |
| Interest Expense, net | 27.0 |
| Income Taxes | 16.6 |
| Depreciation and Amortization | 38.7 |
| Additional Permitted Charges | 10.5 |
| Credit Agreement EBITDA | $ 121.2 |
| |
| Credit Agreement EBITDA Margin | 15.4% |
Set forth below is a reconciliation of Total Funded Debt to the most directly comparable GAAP measures, Current Portion of Debt and Total Long-Term Debt:
| (In Millions) | September 30, |
| | 2008 | |
| |
| Current Portion of Debt | $ | 245.1 | |
| Total Long-Term Debt | | 1,453.8 | |
| Total Debt | | 1,698.9 | |
| Less: Hedge Adjustments Resulting From Terminated | |
| Fair Value Interest Rate Derivatives or Swaps | | (6.6 | ) |
| Total Debt Less Hedge Adjustments | | 1,692.3 | |
| Less: Deferred Cash | | (52.1 | ) |
| Plus: Letters of Credit and Guarantees | | 19.9 | |
| Total Funded Debt | $ | 1,660.1 | |
Southern Container Adjusted Net Income and Adjusted EPS Accretion
We also use the non-GAAP measure “Southern Container Adjusted Net Income” and “Adjusted EPS Accretion”. Management believes these non-GAAP financial measures provide our board of directors, investors, potential investors, securities analysts and others with useful information to evaluate the performance of the Company because it excludes specific items that management believes are not indicative of the ongoing operating results of the business in assessing the performance of the acquisition. The Company and the board of directors use this information to evaluate the impact of the Southern Container acquisition.
Set forth is a reconciliation of Southern Container Adjusted Net Income to the most directly comparable GAAP measure, Corrugated Segment Income:
| (In Millions) | Three Months |
| Ended |
| September 30, 2008 |
| |
| Corrugated Segment Income | $ | 39.4 | |
| Less: Legacy Corrugated Segment Income | | (4.0 | ) |
Southern Container Segment Income (1) | | 35.4 | |
| Plus: Acquisition Inventory step up | | 1.3 | |
Corporate expense and other costs | | (1.9 | ) |
| Southern Container Adjusted Segment Income | $ | 34.8 | |
| Allocated Interest expense, net | | (17.5 | ) |
| Allocated Tax expense | | (6.3 | ) |
| Southern Container Adjusted Net Income | $ | 11.0 | |
| |
| Adjusted EPS Accretion | $ | 0.29 | |
| | | |
(1) Legacy Corrugated segment income includes corrugated facilities operated prior to the Southern Container acquisition. |
Adjusted Net Income and Adjusted Earnings per Diluted Share
We also use the non-GAAP measures “adjusted net income” and “adjusted earnings per diluted share”. Management believes these non-GAAP financial measures provide our board of directors, investors, potential investors, securities analysts and others with useful information to evaluate the performance of the Company because it excludes restructuring and other costs, net, and other specific items that management believes are not indicative of the ongoing operating results of the business. The Company and the board of directors use this information to evaluate the Company’s performance relative to other periods.
Set forth below are reconciliations of adjusted net income and adjusted earnings per diluted share to the most directly comparable GAAP measures, Net Income and Earnings per Diluted Share, respectively:
| | | | | | | | |
| Three Months | | Three Months | | | Twelve Months | | Twelve Months |
| Ended | | Ended | | | Ended | | Ended |
| September 30, | | September 30, | | | September 30, | | September 30, |
| (In Millions) | 2008 | | 2007 | | | 2008 | | 2007 |
| | | | | | | | |
| Net income | $ | 28.4 | | $ | 19.7 | | | $ | 81.8 | | $ | 81.7 |
| | | | | | | | |
| Restructuring and other costs, net | | 5.2 | | | 1.5 | | | | 10.0 | | | 3.0 |
| Acquisition inventory step up | | 0.9 | | | — | | | | 7.8 | | | — |
| Solvay Mill expansion and upgrade | | — | | | — | | | | 2.4 | | | — |
| Acquisition bridge financing fee | | — | | | — | | | | 1.9 | | | — |
Debt extinguishment costs | | — | | | — | | | | 1.2 | | | — |
| Operating losses of previously closed facility | | — | | | — | | | | 0.7 | | | — |
| Capacity increase related outage at Battle Creek Mill | | — | | | 1.1 | | | | — | | | 1.1 |
| | | | | | | | | |
| Adjusted net income | $ | 34.5 | | $ | 22.3 | | | $ | 105.8 | | $ | 85.8 |
| | | | | | | | |
| Three Months | | Three Months | | | Twelve Months | | Twelve Months |
| Ended | | Ended | | | Ended | | Ended |
| September 30, | | September 30, | | | September 30, | | September 30, |
| | 2008 | | 2007 | | | 2008 | | 2007 |
| | | | | | | | |
| Earnings per diluted share | $ | 0.74 | | $ | 0.50 | | | $ | 2.14 | | $ | 2.07 |
| | | | | | | | |
| Restructuring and other costs, net | | 0.14 | | | 0.04 | | | | 0.26 | | | 0.07 |
| Acquisition inventory step up | | 0.02 | | | — | | | | 0.21 | | | — |
| Solvay Mill expansion and upgrade | | — | | | — | | | | 0.06 | | | — |
| Acquisition bridge financing fee | | — | | | — | | | | 0.05 | | | — |
Debt extinguishment costs | | — | | | — | | | | 0.03 | | | — |
| Operating losses of previously closed facility | | — | | | — | | | | 0.02 | | | — |
| Capacity increase related outage at Battle Creek Mill | | — | | | 0.03 | | | | — | | | 0.03 |
| | | | | | | | | |
| Adjusted earnings per diluted share | $ | 0.90 | | $ | 0.57 | | | $ | 2.77 | | $ | 2.17 |
CONTACT:
RockTenn
John Stakel, VP-Treasurer, 678-291-7900
