Nov. 7, 2006 - Rock-Tenn Company yesterday reported record earnings for the quarter ended September 30, 2006.

Fourth Quarter Results:

• Net sales for the fourth quarter of fiscal 2006 increased 7.8% to $569.7 million, an increase of $41.0 million from the fourth quarter of fiscal 2005.
• Segment income of $50.5 million increased $15.5 million, or 44.3%, over the prior year quarter.
• The Company reported net income of $21.5 million, or $0.57 per diluted share, for the quarter compared to net income of $4.9 million, or $0.14 per diluted share, in the prior year quarter.
• Higher paperboard prices impacted inventory valuation in its converting operations. The Company incurred a fourth quarter pre-tax LIFO charge of $2.3 million, or $(0.04) per diluted share after-tax, which reduced income primarily in its packaging products segment.
• The Company recorded tax benefits of $2.3 million, or $0.06 per diluted share, primarily due to a change in its state effective tax rate.
• The Company's pre-tax restructuring and other costs and operating losses from plants in the process of being closed were largely offset by insurance recovery from the May, 2006 mechanical failure of the white liquor clarifier at the Company's bleached paperboard mill. These items netted to a charge of $0.4 million, or $(0.01) per diluted share after-tax.
• Net income for the prior year quarter included pre-tax restructuring and other costs of $3.5 million, and operating losses at plants that were in the process of being closed of $1.3 million. These costs aggregated to $(0.08) per diluted share after-tax.

Segment Results

At the end of fiscal 2006, the Company revised its segment disclosures to include a new Corrugated segment previously included in the Merchandising Displays segment. The financial statements presented have been reclassified to reflect this revision.

Packaging Products Segment

Packaging Products segment net sales increased $6.6 million from the prior year quarter to $320.8 million in the fourth quarter of fiscal 2006 due to higher sales of both folding cartons and interior packaging. Packaging Products segment operating income was $11.6 million in the fourth quarter of fiscal 2006 compared to $11.8 million in the fourth quarter of fiscal 2005.

Paperboard Segment

Paperboard segment net sales increased $22.3 million from the prior year quarter to $222.2 million in the fourth quarter of fiscal 2006 primarily as a result of higher pricing and higher operating rates in the Company's coated recycled paperboard mills. The average price per ton in the segment increased $22 from the third quarter of fiscal 2006 reflecting higher pricing in all paperboard and pulp grades. Paperboard segment operating income increased $12.5 million over the prior year quarter to $28.5 million in the fourth quarter of fiscal 2006. The Company's recycled paperboard mills operated at 99% of capacity in the fourth quarter compared to 91% in the prior year quarter. The Company's bleached paperboard mill operated at 100% of capacity in the fourth quarter of fiscal 2006.

Merchandising Displays Segment

Merchandising Displays segment net sales increased $11.8 million over the prior year quarter to $69.4 million in the fourth quarter of fiscal 2006. Operating income for the segment was $8.8 million in the fourth quarter of fiscal 2006 and $6.1 million in the fourth quarter of fiscal 2005, an increase of 44.3%.

Corrugated Segment

Corrugated segment net sales increased $9.1 million over the prior year quarter to $38.8 million in the fourth quarter of fiscal 2006 due to increased sales of corrugated sheet stock and higher prices. Operating income for the segment was $1.6 million in the fourth quarter of fiscal 2006 and $1.1 million in the fourth quarter of fiscal 2005, an increase of 45.5%.

Chairman and Chief Executive Officer's Statement

Rock-Tenn Company Chairman and Chief Executive Officer James A. Rubright stated, "The primary drivers of our record quarterly earnings are improving industry fundamentals for recycled paperboard, the low cost position we have achieved through investments in our recycled mills and earnings accretion from the Gulf States acquisition in 2005. In addition to our mill performance, our display and corrugated businesses achieved higher earnings compared to the prior year quarter driven by higher sales and an improving business environment.

"In fiscal 2007 we expect to see strong demand for all paperboard grades continuing through the year and further recovery of previously announced recycled paperboard price increases in the December and March quarters. Packaging results should improve as we expect modest sales growth and better margins from operating efficiencies and cost reductions. We also expect higher earnings in our display segment resulting from sales growth in both temporary and theft deterrent permanent displays."

Cash Provided By Operating Activities

Net cash provided by operating activities in the fourth quarter of fiscal 2006 was $55.3 million compared to net cash provided by operating activities of $54.6 million in the prior year quarter.

In fiscal 2006, net cash provided by operating activities was $153.5 million compared to net cash provided by operating activities of $153.3 million in the prior year.

The Company funded $64.6 million of capital expenditures, $13.2 million of dividend payments to shareholders and $20.6 million of pension contributions during the year.

Financing

Rock-Tenn's net debt was $788.8 million at September 30, 2006 compared to $830.0 million at June 30, 2006 and $876.0 million at September 30, 2005. The Company reduced net debt by $41.2 million during the quarter and $87.2 million during the fiscal year. The Company's Credit Agreement Debt/ EBITDA ratio was 3.94 times as of September 30, 2006, down from 4.55 times as of June 30, 2006.

About Rock-Tenn Company

Rock-Tenn Company provides a wide range of marketing and packaging solutions to consumer products companies at low costs, with 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