RockTenn Posts Record 4th Quarter Earnings
Nov. 4, 2008 - RockTenn yesterday reported earnings for the quarter ended September 30, 2008 of $0.74 per diluted share. The Company’s adjusted earnings were $0.90 per diluted share, excluding specific items related to the Southern Container acquisition and other restructuring charges. Adjusted earnings per diluted share increased 58% over the prior year quarter adjusted earnings of $0.57 per diluted share.
Fourth Quarter Results
- Net sales of $785.7 million for the fourth quarter of fiscal 2008 increased $180.9 million, or 30%, over the fourth quarter of fiscal 2007 due to increased net sales in each of our segments and the Southern Container acquisition.
- Segment income increased to $90.3 million compared to $54.5 million in the prior year quarter, a 66% increase over the prior year quarter.
- RockTenn’s pre-tax restructuring and other costs were $8.1 million, or $0.14 per diluted share after-tax, for the fourth quarter of fiscal 2008 primarily related to the closure of the Baltimore, Maryland folding carton plant and specific items related to the Southern Container acquisition. The Southern Container costs related to pre-tax acquisition related deferred compensation expense (“ESU Expense”) of $2.1 million, pre-tax integration expenses of $1.8 million and $2.3 million pre-tax related to corrugated plant closures.
- During the quarter, the Company adjusted the value assigned to the inventory acquired as part of the Southern Container acquisition. This adjustment increased the purchase accounting step up in value, which we then expensed in the fourth quarter resulting in a reduction of our fourth quarter of fiscal 2008 income of $1.3 million pre-tax.
RockTenn Chairman and Chief Executive Officer James A. Rubright stated, “RockTenn’s record earnings result from continued strong demand for our consumer packaging and paperboard and earnings accretion from the acquisition of Southern Container. With higher pricing and continued increases in productivity we were able to more than offset high commodity input costs. The costs of recycled fiber and natural gas have declined significantly from the average costs in the quarter, which should result in higher margins and cash flow generation in fiscal 2009.”
On July 15, 2008, we announced a realignment of operating responsibilities. Our results have been reclassified for all periods presented to reflect this realignment. The four business segments include the following: Consumer Packaging, consisting of our folding carton business and six coated paperboard mills; Corrugated Packaging, consisting of the Solvay and St. Paul containerboard mills and our corrugated converting operations; Merchandising Displays; and Specialty Paperboard Products, consisting of five uncoated paperboard mills, sixteen converting locations (including all RTS partition locations) and our recycled fiber procurement and trading activities.
Paperboard and Containerboard Tons Shipped and Average Price
Total tons shipped in the fourth quarter of fiscal 2008 increased by 206,706 tons over the prior year quarter, which includes 195,732 tons shipped by the Solvay containerboard mill acquired in the Southern Container acquisition. Bleached paperboard increased 2% over the prior year quarter to 90,724 and market pulp tons shipped decreased to 21,537 tons. The average selling price for all paperboard and containerboard grades decreased $11 per ton over the prior year quarter as higher paperboard and containerboard pricing was more than offset by the effect of the increased mix of lower priced containerboard following the Southern Container acquisition. Excluding the Solvay Mill, average recycled fiber costs decreased $4 per ton over the prior year quarter and energy increased $18 per ton of recycled paperboard. Fiber costs for bleached paperboard increased $31 per ton.
Consumer Packaging Segment
Consumer Packaging segment net sales were $393.0 million in the fourth quarter of fiscal 2008 compared to $376.1 million in the prior year quarter, due primarily to higher unit pricing in the fiscal 2008 quarter. Segment income decreased $3.6 million over the prior year quarter to $30.7 million in the fourth quarter of fiscal 2008 due primarily to higher energy, chemicals and fiber costs in our mills. Segment return on sales was 7.8% compared to 9.1% in the prior year quarter.
Corrugated Packaging Segment
Corrugated Packaging segment net sales increased $164.2 million over the prior year quarter to $225.2 million in the fourth quarter of fiscal 2008. The increase in segment net sales is due to the Southern Container acquisition, higher sales volumes in the acquired operations and higher pricing. Segment income was $39.4 million in the fourth quarter of fiscal 2008 and $3.1 million in the prior year quarter.
Merchandising Displays Segment
Merchandising Displays segment net sales increased $2.9 million, or 3%, over the prior year fourth quarter, to $88.4 million in the fourth quarter of fiscal 2008 on strong demand for promotional displays. Segment income increased $1.1 million compared to the prior year quarter as pricing, sales volumes and mix and operational improvements more than offset higher input costs.
Specialty Paperboard Products Segment
Specialty Paperboard Products segment net sales increased $2.9 million in the fourth quarter of fiscal 2008 from the prior year quarter to $99.2 million primarily due to higher selling prices and an increase in tons shipped. Segment income increased to $8.5 million compared to $6.5 million in the prior year quarter.
Cash Provided By Operating Activities
Net cash provided by operating activities in the fourth quarter of fiscal 2008 was $83.9 million compared to $97.3 million in the prior year quarter.
Financing and Investing Activities
During the fourth quarter of fiscal 2008, RockTenn decreased net debt by $61.6 million. RockTenn reduced its Credit Agreement Debt/EBITDA ratio during the quarter from 3.9 to 3.6 times for the twelve months ended September 30, 2008, exceeding its interim goal for rapid deleveraging following the Southern Container acquisition in March 2008. RockTenn has reduced its leverage ratio from 4.2 times pro forma for the acquisition to 3.6 times and reduced net debt by $150.5 million in the six months since March 31, 2008, from strong cash flows from its legacy operations and earnings and cash flow accretion from the Southern Container acquisition, which RockTenn estimates at an increase of $0.29 in adjusted earnings per diluted share for the quarter from the acquisition.
RockTenn is one of North America’s leading manufacturers of paperboard, containerboard, consumer and corrugated packaging and merchandising displays, with annual net sales of approximately $3.1 billion. The company has operations in the United States, Canada, Mexico, Chile and Argentina.