RockTenn's fiscal Q4 net income jumps to US$176.5M from US$82.3M in year-ago period; net sales up 5.6% year-over-year, to US$2.49B, helped by higher prices in company's corrugated and consumer packaging, recycling segments
Debra Garcia
NORCROSS, Georgia
,
November 4, 2013
(press release)
–
RockTenn (NYSE:RKT) today reported earnings for the quarter ended September 30, 2013 of $2.40 per diluted share and adjusted earnings of $2.66 per diluted share. Adjusted earnings per diluted share increased 91% over the prior year quarter.
Three Months Three Months Twelve Months Twelve Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2013 2012 2013 2012 Earnings per diluted share $2.40 $1.14 $9.95 $3.45 Alternative fuel mixture credit tax reserve adjustment ― ― (3.46) ― Restructuring and other costs and operating losses and transition costs due to plant closures 0.26 0.19 0.81 0.80 Loss on extinguishment of debt ― 0.06 ― 0.23 Adjusted earnings per diluted share $2.66 $1.39 $7.30 $4.48 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, 2013 2012 2013 2012 NET SALES $ 2,485.1 $ 2,353.8 $ 9,545.4 $ 9,207.6 Cost of Goods Sold 1,930.0 1,933.9 7,698.9 7,674.9 Gross Profit 555.1 419.9 1,846.5 1,532.7 Selling, General and Administrative Expenses 250.0 242.4 954.3 927.5 Restructuring and Other Costs, net 26.0 23.1 78.0 75.2 Operating Profit 279.1 154.4 814.2 530.0 Interest Expense (25.0) (28.0) (106.9) (119.7) Loss on Extinguishment of Debt -- (6.3) (0.3) (25.9) Interest Income and Other Income (Expense), net 1.0 0.2 (0.9) 1.3 Equity in Income of Unconsolidated Entities 1.7 0.5 4.6 3.4 INCOME BEFORE INCOME TAXES 256.8 120.8 710.7 389.1 Income Tax (Expense) Benefit (78.5) (37.4) 21.8 (136.9) CONSOLIDATED NET INCOME 178.3 83.4 732.5 252.2 Less: Net Income Attributable to Noncontrolling Interests (1.8) (1.1) (5.2) (3.1) NET INCOME ATTRIBUTABLE TO ROCK-TENN COMPANY SHAREHOLDERS $ 176.5 $ 82.3 $ 727.3 $ 249.1 Computation of diluted earnings per share under the two-class method (in millions, except per share data): Net income attributable to Rock-Tenn Company shareholders $ 176.5 $ 82.3 $ 727.3 $ 249.1 Less: Distributed and undistributed income available to participating securities -- (0.1) (0.2) (0.7) Distributed and undistributed income available to Rock-Tenn Company shareholders $ 176.5 $ 82.2 $ 727.1 $ 248.4 Diluted weighted average shares outstanding 73.4 72.4 73.1 72.1 Diluted earnings per share $ 2.40 $ 1.14 $ 9.95 $ 3.45
Fourth Quarter Results
Net sales of $2,485 million for the fourth quarter of fiscal 2013 increased $131 million compared to the fourth quarter of fiscal 2012. Segment income of $332 million increased $123 million or 59% over the prior year quarter.
RockTenn's restructuring and other costs and operating losses and transition costs due to plant closures for the fourth quarter of fiscal 2013 were $0.26 per diluted share after-tax. These costs primarily consisted of $19 million of pre-tax facility closure charges and $7 million of pre-tax acquisition and integration costs. The pre-tax facility closure charges primarily consisted of severance and other employee costs, equipment impairments and carrying costs for facilities acquired in the Smurfit-Stone acquisition that were partially offset by gains on the sale of previously closed facilities.
Chief Executive Officer's Statement
RockTenn Chief Executive Officer, Steve Voorhees, stated, "We are pleased with our record adjusted earnings and cash flow in the September quarter and for all of fiscal 2013. We expect to continue to improve our business performance and generate strong free cash flow during fiscal 2014. With our leverage ratio now below two times for the first time since March 2011, we have significant flexibility to take advantage of opportunities to invest in our business and return capital to shareholders through dividends and stock repurchases."
Segment Results
Containerboard and Paperboard Tons Shipped
Containerboard shipments of approximately 1,825,000 tons decreased approximately 34,000 tons compared to the prior year quarter due to lower domestic sales. Consumer Packaging segment paperboard and pulp shipments of approximately 366,000 tons increased approximately 16,000 tons over the prior year quarter.
Corrugated Packaging Segment
Corrugated Packaging segment net sales increased $147 million to $1,744 million and segment income increased $125 million to $238 million in the fourth quarter of fiscal 2013 compared to the prior year quarter. The increased sales and earnings are primarily related to higher selling prices and increased synergies that were partially offset by higher commodity and other costs. In addition, segment income included a $12 million gain related to the recording of additional value of spare parts at our containerboard mills acquired in the Smurfit-Stone acquisition and a $9 million gain related to the termination of a steam supply contract at our Solvay recycled containerboard mill, net of boiler start-up costs. Corrugated Packaging segment EBITDA margin was 20.0% for the fourth quarter of fiscal 2013 up 630 basis points from the 13.7% in the prior year quarter, the highest such segment EBITDA margin since the Smurfit-Stone acquisition and primarily represents higher pricing, increased synergy realization and continued operating performance improvements.
Consumer Packaging Segment
Consumer Packaging segment net sales increased $11 million and segment income declined $10 million in the fourth quarter of fiscal 2013 compared to the prior year quarter. Segment income in the fourth quarter of fiscal 2012 included $18 million received in connection with the termination and settlement of a paperboard supply agreement, net of legal fees in the period, and segment income in the current year fourth quarter included approximately $8 million related to a partial insurance settlement of property damage claims associated with the prior year Demopolis turbine failure. Additionally, segment income was impacted primarily by higher commodity and other costs that were partially offset by generally higher selling prices and volumes. Consumer Packaging segment EBITDA margin was 17.0% for the fourth quarter of fiscal 2013, driven by higher SBS, URB and pulp pricing and continued operating execution.
Recycling Segment
Recycling segment net sales increased $12 million over the prior year fourth quarter to $276 million primarily as the impact of increased selling prices exceeded the impact of lower volumes. Segment income increased $7 million in the fourth quarter of fiscal 2013 compared to the prior year quarter primarily due to the impact of cost structure improvements.
Cash Provided From Operating, Financing and Investing Activities
Cash provided by operations was $310 million in the fourth quarter of fiscal 2013, after pension funding in excess of expense of $80 million. We reduced net debt (as defined) by $176 million in the September quarter to $2.81 billion and our Leverage Ratio (as defined) was 1.95 times. Total debt was $2.84 billion at September 30, 2013. We invested $133 million in capital expenditures and returned $22 million in dividends to our shareholders.
Capital Allocation
The RockTenn board of directors approved an increase in the Company's available share repurchase authorization from 1.8 million to 5.0 million shares of Class A common stock, to be completed from time to time at the Company's discretion. In October 2013, the board authorized an increase of our dividend to $0.35 per share of Class A common stock payable on November 18, 2013, a 16.7% increase from the dividend declared in July 2013 and representing an annualized rate of $1.40 per share.
Conference Call
We will host a conference call to discuss our results of operations for the fourth quarter of fiscal 2013 and other topics that may be raised during the discussion at 9:00 a.m., Eastern Time, on November 5, 2013. The conference call will be webcast live with an accompanying slide presentation, along with a copy of this press release, at www.rocktenn.com.
Investors who wish to participate in the webcast via teleconference should dial 888-790-4710 (inside the U.S.) or 773-756-0961 (outside the U.S.) at least 15 minutes prior to the start of the call and enter the passcode ROCKTENN. Replays of the call will be available through November 19, 2013 and can be accessed at 866-351-2785 (U.S. callers) and 203-369-0055 (outside the U.S.).
About RockTenn
RockTenn (NYSE:RKT) is one of North America's leading integrated manufacturers of corrugated and consumer packaging. RockTenn's 26,000 employees are committed to exceeding their customers' expectations — every time. The Company operates locations in the United States, Canada, Mexico, Chile, Argentina and China. For more information, visit www.rocktenn.com.
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