RockTenn swings to fiscal Q3 net income of US$58.2M from loss of US$30.1M in year-ago period, reports net sales up 66.6% year-over-year to US$2.30B primarily because of Smurfit-Stone acquisition; CEO cites continued solid performance across business units
July 24, 2012
– RockTenn (RKT) today reported earnings for the quarter ended June 30, 2012 of $0.81 per diluted share and adjusted earnings of $0.95 per diluted share.
Third Quarter Results
Net sales of $2,303.2 million for the third quarter of fiscal 2012 increased $921.1 million over the third quarter of fiscal 2011, primarily as a result of the May 27, 2011, Smurfit-Stone acquisition.
Segment income was $159.3 million up $13.6 million or 9.3% over the prior year quarter after adjusting the prior year quarter to eliminate $55.4 million of pre-tax acquisition inventory step-up. The increase was primarily a result of the Smurfit-Stone acquisition and increased profitability in our Consumer Packaging segment.
RockTenn’s restructuring and other costs and operating losses and transition costs due to plant closures, net of related noncontrolling interest were $0.14 per diluted share after-tax, for the third quarter of fiscal 2012. These costs consisted primarily of $7.5 million of pre-tax integration and acquisition costs, including professional services, employee and other costs, $6.2 million of pre-tax facility closure charges primarily related to corrugated container plants acquired in the Smurfit-Stone Acquisition, the permanent shutdown of the medium machine at Hodge, Louisiana containerboard mill, net of a gain on sale of our Columbus, Indiana laminated converting facility and $1.9 million of pre-tax operating losses and transition costs primarily related to corrugated container plants acquired in the Smurfit-Stone acquisition.
Chairman and Chief Executive Officer’s Statement
RockTenn Chairman and Chief Executive Officer James A. Rubright stated, “RockTenn’s third quarter earnings per share reflect continued solid performance across our business units with particularly strong results in our consumer segment where lower recycled fiber and energy costs, strong operating performance and sales growth in merchandising displays drove segment earnings up 37% over the prior year quarter. Our corrugated segment performance, while generally above our expectations, reflected approximately $10 million ($.09 per share) in expense from higher than expected costs, lost production and supply chain disruption associated primarily with major capital projects at our Hodge, Louisiana mill.
Containerboard and Paperboard Tons Produced
Total tons produced in the third quarter of fiscal 2012 were approximately 2.13 million tons, an increase of approximately 0.9 million tons over the prior year quarter due to the Smurfit-Stone acquisition, and a sequential decrease of approximately 36,000 tons from the second quarter of fiscal 2012. The sequential quarter decrease was primarily due to scheduled major maintenance outages and capital projects at our containerboard mills.
Corrugated Packaging Segment
Corrugated Packaging segment net sales increased $810.7 million to $1,545.2 million in the third quarter of fiscal 2012 compared to the prior year quarter, due primarily to the Smurfit-Stone acquisition. Segment income increased to $73.4 million in the third quarter of fiscal 2012 compared to $24.6 million in the prior year quarter. The third quarter of fiscal 2011 included $55.4 million of pre-tax acquisition inventory step-up compared to $0.2 million in the third quarter of fiscal 2012. Corrugated Packaging segment EBITDA margin was 11.3% for the third quarter of fiscal 2012, as the higher than expected costs for our Hodge outage offset otherwise solid performance amid improving industry fundamentals as the quarter came to a close.
Consumer Packaging Segment
Consumer Packaging segment net sales increased $49.3 million in the third quarter of fiscal 2012 compared to the prior year quarter, primarily due to increased display sales including those from the Smurfit-Stone acquisition. Segment income was $83.7 million in the third quarter of fiscal 2012 compared to $61.1 million in the prior year quarter due primarily to increased display sales, lower recycled fiber and energy costs that were partially offset by higher freight costs. Consumer Packaging segment EBITDA margin was 17.1% for the third quarter of fiscal 2012.
Recycling and Waste Solutions Segment
Recycling and Waste Solutions segment net sales increased $191.5 million over the prior year third quarter to $338.9 million primarily due to the Smurfit-Stone acquisition. Segment income was $2.2 million in the third quarter of fiscal 2012 compared to $4.6 million in the prior year as declining recycled fiber prices compressed margins.
Cash Provided From Operating, Financing and Investing Activities
At June 30, 2012, total debt was $3.36 billion and our Leverage Ratio (as hereinafter defined) was 2.84 times, well below our maximum credit agreement covenant of 3.75 times. Effective for the September 30, 2012 quarter, our maximum credit agreement covenant is 3.5 times. Net debt (as hereinafter defined) decreased by $32.6 million in the June quarter to $3.34 billion. Cash provided by operations was $203.6 million in the third quarter of fiscal 2012, after pension and postretirement funding more than expense of $54.1 million. We invested $146.1 million in capital expenditures and returned $14.2 million in dividends to our shareholders.
RockTenn (RKT) is one of North America's leading integrated manufacturers of corrugated and consumer packaging and recycling solutions. 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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS ENDED
FOR THE NINE MONTHS ENDED
Cost of Goods Sold
Selling, General and Administrative Expenses
Restructuring and Other Costs, net
Loss on Extinguishment of Debt
Interest Income and Other Income, net
Equity in Income of Unconsolidated Entities
INCOME (LOSS) BEFORE INCOME TAXES
CONSOLIDATED NET INCOME (LOSS)
Less: Net Income Attributable to Noncontrolling Interests
NET INCOME (LOSS) ATTRIBUTABLE TO ROCK-TENN COMPANY SHAREHOLDERS
Computation of diluted earnings (loss) per share under the two-class method (in millions, except per share data):
Net income (loss) attributable to Rock-Tenn Company shareholders
Less: Distributed and undistributed income available to participating securities
Distributed and undistributed income (loss) available to Rock-Tenn Company shareholders
Diluted weighted average shares outstanding
Diluted earnings (loss) per share
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