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Rock-Tenn Posts Fourth Quarter Loss

Jan. 26, 2006 (Press Release) - Rock-Tenn Company 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.

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.

SOURCE: Rock-Tenn Company




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