Exhibit 99.1
Rock-Tenn Company Reports First Quarter Fiscal Year 2006 Results
NORCROSS, Ga.--(BUSINESS WIRE)--Jan. 26, 2006--Rock-Tenn Company
(NYSE:RKT) today reported financial results for the quarter ended
December 31, 2005.
First Quarter Developments
-- Net sales for the first quarter of fiscal 2006 were $490.4
million, an increase of $104.6 million, or 27.1%, from net
sales of $385.8 million in the first quarter of fiscal 2005.
-- The Company reported a net loss of $9.0 million, or $0.25 per
diluted share, for the quarter compared to net income of $0.5
million, or $0.01 per diluted share, in the prior year
quarter.
-- Higher energy costs, primarily in the Company's paperboard
mills, reduced operating income by $10.7 million, or $0.18 per
diluted share.
-- Non-allocated costs increased by $2.1 million, or $0.04 per
diluted share, primarily due to increased audit and
Sarbanes-Oxley compliance costs.
-- Operating income was reduced by combined restructuring and
operating losses of $2.0 million, or $0.04 per diluted share,
at the Company's Waco and Marshville folding carton facilities
that were closed in the first quarter of fiscal 2006.
-- The Company recorded income tax expense of $1.4 million, or
$0.04 per diluted share, attributable to a change in deferred
taxes from a tax law change in Quebec.
Segment Results
Packaging Products Segment
Packaging Products segment net sales were $301.1 million in the
first quarter of fiscal 2006 compared to $221.8 million in the first
quarter of fiscal 2005. The increase was primarily due to sales from
the Gulf States Paperboard and Packaging ("GSPP") assets acquired in
June 2005. Packaging Products segment operating income increased $1.5
million in the first quarter of fiscal 2006 to $6.8 million compared
to $5.3 million in the first quarter of fiscal 2005.
Merchandising Displays Segment
Merchandising Displays segment net sales were $75.4 million in the
first quarter of fiscal 2006 compared to $79.5 million in the prior
year quarter. Operating income for the segment increased to $3.2
million in the first quarter of fiscal 2006, compared to $2.7 million
in the first quarter of fiscal 2005, as margins improved slightly in
what is typically the segment's weakest seasonal quarter.
Paperboard Segment
Paperboard segment net sales increased to $187.7 million in the
first quarter of fiscal 2006 from $128.7 million in the first quarter
of fiscal 2005, primarily as a result of sales of bleached paperboard
and pulp. The segment recorded an operating loss of $1.0 million in
the first quarter of fiscal 2006 compared to operating income of $4.4
million in the prior year quarter. Purchased energy costs for natural
gas and fuel oil increased $9.9 million compared to the prior year
quarter. Segment results also were reduced in line with the Company's
expectations due to the annual maintenance shutdown of the Company's
bleached paperboard mill.
Chairman and Chief Executive Officer's Statement
Rock-Tenn Company Chairman and Chief Executive Officer James A.
Rubright stated, "We expected December 2005 quarter results to be
materially lower than last year's December quarter's results. The
decline in earning per share was primarily due to the first fiscal
quarter spike in natural gas prices following Hurricane Katrina. NYMEX
prompt month closing prices peaked at $13.91 per mmbtu in October,
2005 and higher natural gas and oil prices reduced our earnings by
$0.18 per share. Excluding the effects of higher energy costs and
one-time items, improvements in our operations, acquisition synergies,
and the beginning effects of lower fiber prices increased operating
income by $2.2 million, or $0.04 per share, compared to the results
for the first quarter of fiscal 2005.
"Beginning in the second fiscal quarter of 2006, we expect to
realize price increases for recycled paperboard and corrugating medium
from published index price increases, lower recycled fiber costs due
to significant weakening in recovered paper prices, lower energy costs
and seasonally stronger demand for our products. With significant
improvements in operating conditions and the accretion we expect from
the GSPP acquisition, we believe our results for the balance of the
fiscal year will improve compared to our first quarter results. We
expect Credit Agreement EBITDA for fiscal year 2006 at or above our
current Credit Agreement EBITDA of $195 million."
Financing
Rock-Tenn's net debt was $874.6 million at December 31, 2005
compared to $876.0 million at September 30, 2005.
Cash Provided By Operating Activities
Net cash provided by operating activities in the first quarter of
fiscal 2006 was $17.3 million compared to cash provided by operating
activities from continuing operations of $22.4 million in the prior
year quarter.
Conference Call
The Company will host a conference call to discuss its results of
operations for the first quarter of fiscal 2006 and other topics that
may be raised during the discussion at 11:00 a.m., Eastern Time, on
Thursday, January 26, 2006. 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.
About Rock-Tenn Company
Rock-Tenn Company provides a wide range of marketing and packaging
solutions to consumer products companies at low costs, with combined
pro forma net sales of approximately $2.1 billion and operating
locations in the United States, Canada, Mexico, Argentina and Chile.
The Company is one of North America's leading manufacturers of
packaging products, merchandising displays and bleached and recycled
paperboard.
Cautionary Statements
Statements herein regarding, among others, expectations regarding
price increases, material and energy costs, market and seasonal
demand, earnings accretion and expected financial performance
constitute forward-looking statements within the meaning of the
federal securities laws. Such 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, the Company has made assumptions regarding, among
other things, expected economic, competitive and market conditions
generally; expected 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 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.
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.
ROCK-TENN COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- ----------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
December 31, December 31,
2005 2004
- ----------------------------------------------------------------------
NET SALES $ 490,448 $ 385,817
Cost of Goods Sold 430,840 330,816
- ----------------------------------------------------------------------
Gross Profit 59,608 55,001
Selling, General and Administrative
Expenses 57,178 45,801
Restructuring and Other Costs 970 476
- ----------------------------------------------------------------------
Operating Profit 1,460 8,724
Interest Expense (13,860) (6,448)
Interest and Other Income 52 176
Income from Unconsolidated Joint Venture 1,552 143
Minority Interest in Income of
Consolidated Subsidiaries (1,298) (865)
- ----------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES (12,094) 1,730
Provision (Benefit) for Income Taxes (3,118) 1,248
- ----------------------------------------------------------------------
NET INCOME (LOSS) $ (8,976) $ 482
- ----------------------------------------------------------------------
Weighted Average Common Shares
Outstanding-Diluted 35,831 35,881
- ----------------------------------------------------------------------
Diluted Earnings (Loss) Per Share $ (0.25) $ 0.01
- ----------------------------------------------------------------------
ROCK-TENN COMPANY
SEGMENT INFORMATION
(UNAUDITED)
(IN THOUSANDS, EXCEPT TONNAGE DATA)
- ----------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
December 31, December 31,
2005 2004
- ----------------------------------------------------------------------
NET SALES:
Packaging Products Segment $ 301,086 $ 221,764
Merchandising Displays Segment 75,396 79,510
Paperboard Segment 187,666 128,703
Intersegment Eliminations (73,700) (44,160)
- ----------------------------------------------------------------------
TOTAL $ 490,448 $ 385,817
- ----------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES:
Packaging Products Segment $ 6,817 $ 5,274
Merchandising Displays Segment 3,188 2,688
Paperboard Segment (992) 4,354
- ----------------------------------------------------------------------
Segment Income $ 9,013 $ 12,316
Restructuring and Other Costs (970) (476)
Non-Allocated Expense (5,031) (2,973)
Interest Expense (13,860) (6,448)
Interest and Other Income 52 176
Minority Interest in Income of
Consolidated Subsidiary (1,298) (865)
- ----------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES $ (12,094) $ 1,730
- ----------------------------------------------------------------------
Recycled Paperboard Shipped (in tons) 253,032 253,257
SBS Board Shipped (in tons) 79,152 ---
Pulp Shipped (in tons) 14,994 ---
- ----------------------------------------------------------------------
ROCK-TENN COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
- ----------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
December 31, December 31,
2005 2004
- ----------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (8,976) $ 482
Items in income not affecting cash:
Depreciation and amortization 25,786 18,451
Deferred income taxes 3,935 1,177
Share based compensation expense 723 400
Income tax benefit of employee stock
options --- 125
Loss on disposal of property, plant and
equipment and other, net 58 65
(Gain) loss on currency translation (66) 383
Income from unconsolidated joint venture (1,552) (143)
Minority interest in income of consolidated
subsidiary 1,298 865
Impairment gain and other non-cash items --- (857)
Pension funding less than expense 4,301 3,349
Net changes in operating assets and
liabilities (8,202) (1,908)
- ----------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 17,305 22,389
- ----------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (13,512) (10,174)
Purchases of marketable securities --- (89,560)
Maturities and sales of marketable
securities --- 84,560
Cash paid for purchase of businesses, net
of cash received (18) (75)
Proceeds from sale of property, plant and
equipment 292 2,043
- ----------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES (13,238) (13,206)
- ----------------------------------------------------------------------
FINANCING ACTIVITIES:
Net repayments to revolving credit
facilities (91,900) ---
Additions to debt 84,243 ---
Repayments of debt (3,934) (6,104)
Debt issuance costs (242) (64)
Issuance of common stock 1,591 1,824
Excess tax benefits from share based
compensation 58 ---
Cash dividends paid to shareholders (3,277) (3,222)
Distribution to minority interest (525) (525)
- ----------------------------------------------------------------------
CASH USED FOR FINANCING ACTIVITIES (13,986) (8,091)
- ----------------------------------------------------------------------
Effect of exchange rate changes on cash (425) 205
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,344) 1,297
Cash and cash equivalents:
Beginning of period 26,839 28,661
- ----------------------------------------------------------------------
End of period $ 16,495 $ 29,958
- ----------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes, net of refunds $ 2,418 $ 2,001
Interest, net of amounts capitalized 7,344 313
- ----------------------------------------------------------------------
ROCK-TENN COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
- ----------------------------------------------------------------------
DEC. 31, SEPT. 30, DEC. 31,
2005 2005 2004
- ----------------------------------------------------------------------
ASSETS:
Cash and cash equivalents $ 16,495 $ 26,839 $ 29,958
Investment in marketable securities --- --- 33,230
Receivables - net 192,751 199,493 154,970
Inventories - at LIFO cost 196,650 201,965 134,057
Other current assets 42,107 30,484 25,399
Current assets held for sale 5,082 3,435 804
- ----------------------------------------------------------------------
TOTAL CURRENT ASSETS 453,085 462,216 378,418
- ----------------------------------------------------------------------
Land, building and equipment - net 872,618 885,005 549,868
Intangible and other assets 455,613 451,213 345,808
- ----------------------------------------------------------------------
TOTAL ASSETS $1,781,316 $1,798,434 $1,274,094
- ----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current maturities of debt $ 96,720 $ 62,079 $ 78,116
Hedge adjustments resulting from
terminated interest rate
derivatives or swaps --- --- 1,401
Hedge adjustments resulting from
existing interest rate
derivatives or swaps --- --- (417)
---------- ----------- ----------
Total current portion of debt 96,720 62,079 79,100
Other current liabilities 212,812 217,131 171,913
- ----------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 309,532 279,210 251,013
- ----------------------------------------------------------------------
Long-term maturities of debt 794,420 840,747 381,496
Hedge adjustments resulting from
terminated interest rate
derivatives or swaps 11,813 12,255 18,514
Hedge adjustments resulting from
existing interest rate
derivatives or swaps --- --- (3,509)
---------- ----------- ----------
Total long-term debt, less current
maturities 806,233 853,002 396,501
Accrued pension 110,931 106,767 82,613
Deferred income taxes 86,184 82,974 86,529
Other long-term liabilities 3,613 3,655 4,068
Minority interest 17,455 16,604 7,792
Shareholders' equity 447,368 456,222 445,578
- ----------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,781,316 $1,798,434 $1,274,094
- ----------------------------------------------------------------------
Rock-Tenn Company Quarterly Statistics
Paperboard Group Operating Statistics
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Fiscal Year
------------------------------------------------
Average Price Per Ton(a)
- ----------------------
All Tons
2004 $422 $424 $439 $455 $435
2005 467 472 491 523 492
2006 523
Tons Shipped
- -------------
Coated and Specialty(a)
2004 230,710 248,743 248,078 224,881 952,412
2005 210,566 209,706 211,628 209,721 841,621
2006 208,047
Corrugated Medium
2004 43,880 42,942 44,667 46,103 177,592
2005 42,691 45,228 44,758 44,841 177,518
2006 44,985
Bleached Paperboard
2005 --- --- 26,713 84,169 110,882
2006 79,152
Market Pulp
2005 --- --- 6,933 23,104 30,037
2006 14,994
Total
2004 274,590 291,685 292,745 270,984 1,130,004
2005 253,257 254,934 290,032 361,835 1,160,058
2006 347,178
(a) Average Price Per Ton and Tons Shipped include tons shipped by
Seven Hills Paperboard LLC, our joint venture with LaFarge North
America, Inc.
Rock-Tenn Company Quarterly Statistics
Segment Sales and Operating Income
(In Thousands)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Fiscal Year
------------------------------------------------
Packaging Segment Sales
2004 $208,875 $231,772 $231,526 $235,912 $908,085
2005 221,764 218,792 239,211 314,210 993,977
2006 301,086
Packaging Income
2004 $7,037 $10,208 $11,714 $9,038 $37,997
2005 5,274 5,722 10,648 11,773 33,417
2006 6,817
Return On Sales
2004 3.4% 4.4% 5.1% 3.8% 4.2%
2005 2.4% 2.6% 4.5% 3.7% 3.4%
2006 2.3%
Merchandising Displays Segment Sales
2004 $73,518 $77,440 $75,841 $91,475 $318,274
2005 79,510 86,090 83,521 84,691 333,812
2006 75,396
Merchandising Displays Income
2004 $5,932 $7,507 $6,096 $9,540 $29,075
2005 2,688 4,835 6,398 7,175 21,096
2006 3,188
Return on Sales
2004 8.1% 9.7% 8.0% 10.4% 9.1%
2005 3.4% 5.6% 7.7% 8.5% 6.3%
2006 4.2%
Paperboard Segment Sales
2004 $128,262 $136,142 $138,560 $136,918 $539,882
2005 128,703 131,831 154,929 199,980 615,443
2006 187,666
Paperboard Income (Loss)
2004 $3,130 $2,361 $2,639 $7,621 $ 15,751
2005 4,354 3,650 7,597 15,996 31,597
2006 (992)
Return on Sales
2004 2.4% 1.7% 1.9% 5.6% 2.9%
2005 3.4% 2.8% 4.9% 8.0% 5.1%
2006 (0.5)%
Rock-Tenn Company Quarterly Statistics
Key Financial Statistics
(In Thousands except EPS Data)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Fiscal Year
------------------------------------------------
Net Income (Loss)
2004 $11,879 $2,910 $(3,726) $6,585 $17,648
2005 482 240 11,982 4,910 17,614
2006 (8,976)
Diluted EPS
2004 $0.34 $0.08 $(0.11) $0.18 $0.50
2005 0.01 0.01 0.33 0.14 0.49
2006 (0.25)
Depreciation & Amortization
2004 $18,602 $18,557 $18,387 $18,643 $74,189
2005 18,451 18,579 20,493 26,517 84,040
2006 25,786
Capital Expenditures
2004 $15,421 $14,923 $18,269 $12,210 $60,823
2005 10,174 12,278 11,742 20,132 54,326
2006 13,512
Non-GAAP Measures
Net Debt
We have defined the non-GAAP measure net debt to include the
aggregate debt obligations reflected in our balance sheet, less the
hedge adjustments resulting from terminated and existing interest rate
derivatives or swaps, the balance of our cash and cash equivalents and
certain other investments that we consider to be readily available to
satisfy such debt obligations.
Rock-Tenn management uses net debt, along with other factors, 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. Set forth below is a reconciliation of
net debt to the most directly comparable GAAP measures, Total Current
Portion of Debt and Total Long-term Debt, Less Current Portion:
In Thousands Dec. 31, Sept. 30,
2005 2005
--------- --------
Total Current Portion of Debt $ 96,720 $ 62,079
Total Long-term Debt, Less Current
Portion 806,233 853,002
--------- --------
902,953 915,081
Less: Hedge Adjustments Resulting From
Terminated Interest Rate
Derivatives or Swaps (11,813) (12,255)
Less: Hedge Adjustments Resulting From
Existing Interest Rate Derivatives
or Swaps --- ---
--------- --------
Debt Net of Hedge Adjustments 891,140 902,826
Less: Cash and Cash Equivalents (16,495) (26,839)
Less: Investment in Marketable
Securities --- ---
--------- --------
Net Debt $ 874,645 $875,987
--------- --------
Credit Agreement EBITDA
Credit Agreement EBITDA is calculated in accordance with the
definition contained in the company's Senior Credit Facility. Credit
Agreement EBITDA is 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,
expenses associated with the write up of inventory acquired in the
GSPP acquisition to fair market value as required by FSAS 121,
charges taken resulting from the impact of changes to accounting rules
related to the expensing of stock options and pro forma GSPP EBITDA
calculated giving pro forma effect to the acquisition calculated in
accordance with the methodology applied by the company in its
financial statements filed with the SEC.
Rock-Tenn management uses Credit Agreement EBITDA, along with
other factors, to evaluate our financial condition. We believe that
Credit Agreement EBITDA is an appropriate supplemental measure of
financial condition because it provides a more complete understanding
of our financial condition and liquidity.
Set forth below is a reconciliation of Credit Agreement EBITDA to
the most directly comparable GAAP measure, net income:
12 Months Ended
In Millions December 31,
2005
----------------
Net Income $ 8.2
Plus/Minus
- ----------
Interest Expense 43.9
Income Taxes (2.1)
Depreciation and Amortization 90.3
Additional Permitted Charges 9.4
Impact of Expensing Stock Options 0.3
Pro Forma GSPP EBITDA (1/1/05 - 6/5/05) (A) 44.6
--------
Credit Agreement EBITDA $194.6
--------
(A) Pro Forma GSPP EBITDA Reconciliation
Pro Forma
In Millions 1/1/05 - 6/5/05
GSPP EBITDA
----------------
Net Income $14.1
Plus/Minus
- ----------
Interest Expense --
Income Taxes 7.3
Depreciation and Amortization 16.3
Additional Permitted Charges --
Permitted Pro Forma Adjustments 6.9
--------
Pro Forma GSPP EBITDA (1/1/05 - 6/5/05) $44.6
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CONTACT: Rock-Tenn Company
David Rees, 678-291-7552