Exhibit 99.1
Rock-Tenn Company Agrees to Acquire Assets of Gulf States Paper
Corporation's Pulp and Paperboard and Paperboard Packaging Divisions
NORCROSS, Ga.--(BUSINESS WIRE)--April 28, 2005--Rock-Tenn Company
(NYSE:RKT) announced an agreement to acquire the assets of Gulf States
Paper Corporation's Pulp and Paperboard and Paperboard Packaging
(GSPP) business for $540 million. Gulf States operates one of the
lowest cost solid bleached sulphate paperboard mills in North America
and 11 folding carton plants, serving primarily food packaging, food
service and pharmaceutical and health and beauty markets. Net sales of
the acquired business for the 53 week period ended April 3, 2005 were
$487 million. The paperboard mill's annual capacity includes 327,000
tons of bleached paperboard and 91,500 tons of southern bleached
softwood kraft pulp. The shareholders and Board of Directors of Gulf
States and the Board of Directors of Rock-Tenn Company have approved
the transaction. The closing is subject to Hart-Scott-Rodino review
and other customary closing conditions. Rock-Tenn plans to finance the
purchase with approximately $50 million of cash on hand and proceeds
from new bank credit facilities that it plans to enter into in a
financing to be led by Wachovia Capital Markets LLC, SunTrust Capital
Markets Inc. and Banc of America Securities LLC. Rock-Tenn expects to
close the acquisition in early June 2005. Banc of America Securities
LLC acted as financial advisor to Rock-Tenn on the transaction.
Rock-Tenn's Chairman and Chief Executive Officer, James Rubright
said, "Gulf States' paperboard and packaging business is the best
possible strategic combination for our recycled paperboard and folding
carton business. Gulf States' very low cost bleached paperboard mill,
strong folding carton plants and focus on attractive major food and
food service markets are great complements to our existing business.
This combination will greatly enhance our ability to serve our North
American customers across our extremely diverse product lines. The
transaction also provides us many opportunities to reduce our costs
and increase our capabilities."
As a result of the acquisition, Rock-Tenn will become the second
largest folding carton producer in North America with leading
positions in recycled and bleached paperboard. The purchase price
represents a multiple of approximately 7.2 times Gulf States' Pulp and
Paperboard and Paperboard Packaging divisions' Adjusted EBITDA as
defined herein for the 53 week period ended April 3, 2005. The
purchase price represents a multiple of approximately 6.1 times Gulf
States' Pulp and Paperboard and Paperboard Packaging divisions' Pro
Forma Adjusted EBITDA as defined herein for the 53 week period ended
April 3, 2005. Rock-Tenn estimates that it will realize additional
annual operational synergies, both at the facilities and headquarters,
of approximately $6 million over the two years following the
acquisition. Certain of these synergies will be offset during a
transitional period following the closing by the one-time costs
Rock-Tenn will incur, including costs under a transition services
agreement with Gulf States.
Gulf States' Pulp and Paperboard and Paperboard Packaging
divisions recorded net sales of $487 million for the 53 weeks ended
April 3, 2005. The Pulp and Paperboard division contributed $146
million of net sales and the Paperboard Packaging division accounted
for $341 million of net sales. The divisions recorded net income of
$24.7 million over the 53 week period.
Rock-Tenn Company will discuss details of the transaction during
its conference call on April 28, 2005 at 11:00 AM ET. This call is
being webcast and can be accessed, along with a copy of the press
release and other relevant financial and statistical information
related to the transaction, on Rock-Tenn Company's website at
www.rocktenn.com. The webcast will also be archived on
www.rocktenn.com.
Rock-Tenn Company is one of North America's largest manufacturers
of recycled paperboard, folding cartons and promotional displays, with
consolidated net sales of $1.6 billion in 2004. Rock-Tenn also
believes that it is the largest independent purchaser of bleached
paperboard for folding cartons in North America based on its 2004
purchases of approximately 170,000 tons. Rock-Tenn's folding carton
business' geographic reach and wide-ranging printing capabilities
enable the Company to serve a diverse customer base with complex
requirements across North America. Rock-Tenn Company's paperboard
division is a leading producer of 100% recycled paperboard with 11
mills that manufacture clay-coated and uncoated paperboard that is
converted into a variety of products.
Statements herein regarding the anticipated closing date of the
purchase, the terms, amount, timing and availability of anticipated
financing for the acquisition, cost reductions, synergies and
transitional costs to achieve the synergies and the timing of such
costs and synergies constitute forward-looking statements within the
meaning of the federal securities laws and are subject to certain
risks and uncertainties. With respect to these statements, the Company
has made assumptions regarding, among other things, whether and when
the proposed purchase will be approved; whether and when the proposed
purchase will close; the availability of financing; results and
impacts of the proposed purchase; economic, competitive and market
conditions generally; volumes and price levels of purchases by
customers; 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 such 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 the Company's 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 customers; and adverse
changes in general market and industry conditions. Such risks and
other factors that may impact our assumptions are more particularly
described in the Company's filings with the Securities and Exchange
Commission, including under the caption "Business -- Forward-Looking
Information and Risk Factors" in the Company's Annual Report on Form
10-K for the most recently ended fiscal year. The information
contained herein speaks as of the date hereof and the Company does not
have or undertake any obligation to update such information as future
events unfold.
Non-GAAP Measures
Adjusted EBITDA (as defined) and Pro Forma Adjusted EBITDA (as
defined)
We have defined Adjusted EBITDA to reflect (1) EBITDA, defined as
earnings (net income) before interest, taxes, depreciation and
amortization, and (2) certain additional adjustments (a) to remove the
impact of the following special items: interest income and the
cumulative effect of a change in accounting principle, net of tax, and
(b) to add back restructuring and other costs. Rock-Tenn management
used Adjusted EBITDA in evaluating operations because it believes the
adjustments reflected in Adjusted EBITDA remove the effects of factors
that are not representative of a company's core ongoing operations or
otherwise distort trends in underlying operating results. While some
of these special items may have occurred historically and may be
considered to be recurring items for GAAP purposes, occurrence in
future periods is dependent upon future business and economic factors,
among other evaluation criteria, and may frequently be beyond the
control of company management.
We have defined Pro Forma Adjusted EBITDA to reflect (1) Adjusted
EBITDA and (2) additional adjustments that give effect and are
directly attributable to the acquisition by Rock-Tenn, are expected to
have continuing impact on Rock-Tenn and are factually supportable.
These adjustments take into account the costs of administrative
functions provided by GSPP employees who will not become employees of
Rock-Tenn, net of the incremental costs estimated to be incurred by
Rock-Tenn to provide those same administrative functions.
Our definitions of Adjusted EBITDA (as defined) and Pro Forma
Adjusted EBITDA (as defined) may differ from other similarly titled
measures at other companies. Adjusted EBITDA (as defined) and Pro
Forma Adjusted EBITDA (as defined) are not defined in accordance with
accounting principles generally accepted in the United States ("GAAP")
and should not be viewed as alternatives to GAAP measures of operating
results or liquidity. Rock-Tenn management believes that net income is
the most directly comparable GAAP measure to Adjusted EBITDA (as
defined) and that pro forma net income is the most directly comparable
GAAP measure to Pro Forma Adjusted EBITDA (as defined).
We believe Adjusted EBITDA (as defined) and Pro Forma Adjusted
EBITDA (as defined) of GSPP provide useful information to investors
herein for the following reasons.
Rock-Tenn management used Adjusted EBITDA (as defined) and Pro
Forma Adjusted EBITDA (as defined) of GSPP as the starting measure for
our financial evaluation of the purchase price we would pay for the
acquired business. We used Adjusted EBITDA (as defined) and Pro Forma
Adjusted EBITDA (as defined) as a starting point to apply the
assumptions and judgments necessary to estimate the future cash flows
that we would expect to realize from the acquired business, which
included assumptions regarding (a) our estimated future capital
expenditures, (b) the future tax depreciation we would experience
based on the step up in the tax basis of the acquired assets resulting
from the purchase, (c) the expected interest costs we would incur on
debt required to finance the acquisition, (d) the expected combined
state and federal income tax rates on resulting income before income
taxes and (e) numerous other matters that will impact the future cash
flows of the business.
Management also believes such measures provide useful information
to investors because we anticipate that the credit agreement pursuant
to which we expect to finance the proposed acquisition will include a
covenant that will be expressed as a ratio of our total indebtedness
to a defined measure of consolidated adjusted EBITDA. We anticipate
that failure to comply with the covenant would constitute a default
under the credit agreement that would adversely affect our liquidity.
We also anticipate that information about this covenant may be
material to an investor's understanding of Rock-Tenn's financial
condition or liquidity. We believe that we have calculated Adjusted
EBITDA (as defined) and Pro Forma Adjusted EBITDA (as defined) of the
acquired business in a manner generally consistent with the
calculation that will be contained in the credit agreement. However,
because we have not yet finalized the credit agreement, it is possible
that the actual calculation may differ from the calculation we have
shown.
GSPP Reconciliation of Net Income, EBITDA and Adjusted EBITDA
- -------------------------------------------------------------
52 30 52 53 13 13 53
Weeks Weeks Weeks Weeks Weeks Weeks Weeks
Ended Ended Ended Ended Ended Ended Ended
(In Millions) 6/2/02 12/29/02 12/28/03 1/2/05 3/28/04 4/3/05 4/3/05
------------------------------------------------------
Net income ($7.8) $3.7 $10.7 $20.7 $2.9 $6.9 $24.7
Interest expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Tax provision
from continuing
operations 3.2 2.3 3.4 10.1 1.2 3.4 12.4
Tax provision
from cumulative
effect of a
change in
accounting
principle 7.8 0.0 0.0 0.0 0.0 0.0 0.0
Depreciation and
amortization 41.7 23.1 40.8 39.3 9.8 9.6 39.1
------------------------------------------------------
EBITDA $45.0 $29.2 $54.9 $70.2 $13.9 $20.0 $76.2
------------------------------------------------------
Cumulative
effect of a
change in
accounting
principle (net
of ($7.8)
income taxes) $12.5 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Interest and
other income (3.2) (0.9) (2.0) (1.0) (0.2) (0.2) (1.0)
Tax provision
from cumulative
effect of a
change in
accounting
principle (7.8) 0.0 0.0 0.0 0.0 0.0 0.0
Restructuring
and other costs 3.6 2.0 2.7 2.3 2.1 0.0 0.2
------------------------------------------------------
Total additional
adjustments 5.0 1.0 0.7 1.3 1.8 (0.2) (0.7)
------------------------------------------------------
Adjusted EBITDA
(as defined) $50.0 $30.2 $55.6 $71.4 $15.8 $19.8 $75.5
------------------------------------------------------
GSPP Reconciliation of Adjusted EBITDA to Pro Forma Adjusted EBITDA
- -------------------------------------------------------------------
53 Weeks 53 Weeks
Ended Ended
(In Millions) 1/2/2005 4/3/2005
------------------
Adjusted EBITDA (as defined) $71.4 $75.5
Pro Forma Adjustments
- ----------------------------------------------------
Divisional Adjustments 1.6 1.6
Corporate Allocation Adjustments 11.7 12.0
------------------
Pro Forma Adjusted EBITDA (as defined) $84.8 $89.1
==================
Note: During the 53 weeks ended 1/2/05 and 53 weeks ended 4/3/05,
GSPP was allocated $19.5 million and $19.8 million respectively of
corporate overhead for various administrative functions by Gulf
States. Most of the employees involved in providing these services
will remain employees of Gulf States and will not become employees of
Rock-Tenn. The pro forma adjustments of $11.7 million and $12.0
million for the 53 weeks ended 1/2/05 and 4/3/05, respectively,
represents salaries, benefits and other costs for the Gulf States
associates that will not become Rock-Tenn employees. The adjustment
has been reduced for our estimate of incremental costs we will incur
to support the operations acquired. In addition, during the 53 weeks
ended 1/2/05 and 53 weeks ended 4/3/05, GSPP incurred costs of $1.6
million and $1.6 million respectively of overhead for various
administrative functions at the pulp and paperboard and packaging
divisions. The employees involved in these functions will not become
employees of Rock-Tenn. The pro forma adjustments of $1.6 million and
$1.6 million for the 53 weeks ended 1/2/05 and 4/3/05, respectively,
represents salaries, benefits and other costs for the Gulf States
associates that will not become Rock-Tenn employees.
CONTACT: Rock-Tenn Company
David Rees, 678-291-7552