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Rock-Tenn posts improved quarterly net income

April 25, 2007 - Rock-Tenn Company today reported earnings for the quarter ended March 31, 2007 of $0.55 per diluted share on record quarterly sales. Results for the quarter included restructuring and other costs of $0.02 per diluted share after-tax.

Second Quarter Results

  • Net sales for the second quarter of fiscal 2007 increased 10.6% from the second quarter of fiscal 2006 to $585.7 million, an increase of $56.0 million.
  • Segment income of $54.6 million increased $21.2 million from the prior year quarter and $12.1 million from the first quarter of fiscal 2007.
  • The Company reported net income of $21.7 million, or $0.55 per diluted share, for its second fiscal quarter of 2007. The Company reported net income of $5.2 million, or $0.14 per diluted share, in the prior year quarter.
  • Income for the second quarter of fiscal 2007 included pre-tax restructuring and other costs of $1.2 million, or $0.02 per diluted share after-tax, primarily related to the decision to close the Stone Mountain, Georgia folding carton plant. Net income for the prior year quarter included pre-tax restructuring and other costs of $3.5 million and operating losses at folding carton facilities that were closed or in the process of closing of $0.9 million, aggregating to $0.08 per diluted share after-tax.

Segment Results

Packaging Products Segment

Packaging Products segment net sales were $312.8 million in the second quarter of fiscal 2007 compared to $319.7 million in the prior year quarter, with higher unit pricing in the fiscal 2007 quarter representing pass through of higher paperboard costs. Packaging Products segment income of $13.1 million in the second quarter of fiscal 2007 was $0.3 million lower than the second quarter of fiscal 2006. Packaging Products segment return on sales was 4.2%, the same as in the prior year quarter, as operating efficiencies and cost reductions offset the effect of lower sales volumes and higher paperboard costs.

Paperboard Segment

Paperboard segment net sales increased $25.9 million from the prior year quarter to $231.6 million in the second quarter of fiscal 2007, on higher selling prices and an increase in tons shipped from the Company's coated recycled mills. The average selling price for all paperboard grades increased $45 per ton compared to the second quarter of last year. Paperboard segment income increased $11.1 million over the prior year quarter to $26.9 million.

Merchandising Displays Segment

The Merchandising Displays segment had record net sales of $82.6 million in the second quarter of fiscal 2007 on strong demand for promotional displays. Segment income was $12.2 million in the second quarter of fiscal 2007 compared to $3.2 million in the second quarter of fiscal 2006.

Corrugated Segment

Corrugated segment net sales increased $8.5 million over the prior year quarter to a record of $40.4 million in the second quarter of fiscal 2007, primarily due to increased production at the Company's corrugators and higher selling prices. Segment income was $2.4 million in the second quarter of fiscal 2007, a 140% increase over the prior year quarter.

Chairman and Chief Executive Officer's Statement

Rock-Tenn Company Chairman and Chief Executive Officer James A. Rubright stated, "The record sales and strong income gains reflect the continued improvements we have achieved in our businesses. Our paperboard mills experienced sharply higher costs of fiber, which peaked in March 2007 at historically high levels. We still recorded the second highest quarterly Paperboard segment income and the highest net income in our Company's history. We believe we are well positioned to continue to recover currently high fiber and energy costs due to the tight mill supply demand conditions, particularly in our coated recycled paperboard mills."

Cash Provided By Operating Activities

Net cash provided by operating activities in the second quarter of fiscal 2007 was $36.9 million compared to net cash provided by operating activities of $47.9 million in the prior year quarter. Net cash provided by operating activities in this year's quarter was reduced by the funding of $16.2 million in operating assets and liabilities, including an increase of $23.6 million in receivables resulting from the $51.8 million in sales growth over the December quarter. Net cash provided by operating activities in the prior year quarter was increased by $9.9 million in proceeds from the termination of interest rate hedges.

Financing and Investing Activities

During the quarter Rock-Tenn Company acquired the remaining 40% minority interest in its GSD packaging joint venture for $32.0 million, and contributed $4.6 million to its pension plans.

The Company's Credit Agreement Debt/ EBITDA ratio was calculated to be 3.05 times as of March 31, 2007.

During the second quarter of fiscal 2007, net cash provided by financing activities was $22.3 million and included $13.7 million from the issuance of common stock primarily due to the exercise of stock options for 1.1 million shares and the related excess tax benefits from share based compensation of $9.0 million.

Rock-Tenn Company provides a wide range of marketing and packaging solutions to consumer products companies at low costs, with annual net sales of approximately $2.2 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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