RockTenn Posts Fiscal 1Q Profit, Record Income
Jan. 28, 2009 - RockTenn yesterday reported earnings for the quarter ended December 31, 2008 of $0.79 per diluted share. The Company’s adjusted earnings were $0.96 per diluted share, excluding specific items related to the Southern Container acquisition and other restructuring charges. Adjusted earnings per diluted share increased 88% over the prior year quarter adjusted earnings of $0.51 per diluted share.
First Quarter Results
- Net sales of $703.1 million for the first quarter of fiscal 2009 increased $106.8 million, or 18%, over the first quarter of fiscal 2008 due to increased net sales in our Corrugated Packaging segment related to the Southern Container acquisition.
- Segment income increased to $90.0 million compared to $48.4 million in the prior year quarter, an 86% increase over the prior year quarter.
- RockTenn’s pre-tax restructuring and other costs were $6.5 million, or $0.11 per diluted share after-tax, for the first quarter of fiscal 2009 primarily related to pre-tax Southern Container acquisition related integration expenses of $2.4 million, acquisition related deferred compensation expense (“ESU Expense”) of $2.1 million and $2.0 million pre-tax related to previously announced plant closures.
- In November 2008, RockTenn repaid as planned the Solvay Industrial Development Revenue Bonds we assumed as part of the Southern Container acquisition at 102% of par using cash and equivalents on hand and our revolving credit facility. The $2.4 million pre-tax premium, or $0.04 per diluted share after-tax, we incurred to retire the bonds was funded by the former Southern Container stockholders.
- RockTenn incurred pre-tax operating losses at previously closed facilities of $1.3 million, aggregating $0.02 per diluted share after-tax, primarily at the Company’s Baltimore, Maryland folding carton facility.
RockTenn Chairman and Chief Executive Officer James A. Rubright stated, “RockTenn’s record adjusted earnings (up 88% over the prior year quarter) result from the resiliency of our food and consumer nondurables focused end markets, the very low cost positions we have achieved in our core businesses, and the continued success of our 2008 acquisition of Southern Container. Although our December quarter is our seasonally weakest sales quarter, lower costs for recycled fiber and energy more than offset the effect of lower sales enabling us to increase adjusted earnings 7% over the immediately preceding quarter.”
“While we expect continuing lower demand during our fiscal second quarter, we expect to continue to generate strong earnings and free cash flow as lower costs for recycled fiber and energy offset the effects of lower volume.”
Paperboard and Containerboard Tons Shipped and Average Price
Total tons shipped in the first quarter of fiscal 2009 increased by 171,281 tons over the prior year quarter, which includes 178,160 tons shipped by the Solvay containerboard mill acquired in the Southern Container acquisition. Bleached paperboard tons shipped increased 8% over the prior year quarter to 86,338 and market pulp tons shipped decreased 2% to 20,705 tons. The average selling price for all paperboard and containerboard grades increased $11 per ton on a sequential quarter basis despite lower market pulp selling prices.
Consumer Packaging Segment
Consumer Packaging segment net sales were $368.8 million in the first quarter of fiscal 2009 compared to $374.7 million in the prior year quarter, due to lower volumes partially offset by higher unit pricing. Segment income increased $2.8 million over the prior year quarter to $31.5 million in the first quarter of fiscal 2009 due primarily to lower recycled fiber and energy costs in our mills, which were partially offset by higher virgin fiber and chemical costs. Segment return on sales was 8.5% compared to 7.7% in the prior year quarter.
Corrugated Packaging Segment
Corrugated Packaging segment net sales increased $141.8 million over the prior year quarter to $203.2 million in the first quarter of fiscal 2009. The increase in segment net sales is due to the Southern Container acquisition. Segment income was $50.6 million in the first quarter of fiscal 2009 and $4.3 million in the prior year quarter. Segment return on sales was 24.9% compared to 7.0% in the prior year quarter.
Merchandising Displays Segment
Merchandising Displays segment net sales decreased $7.2 million over the prior year first quarter to $74.8 million in the first quarter of fiscal 2009 on decreased demand for promotional displays. Segment income was $5.1 million in the first quarter of fiscal 2009 and $8.0 million in the prior year quarter.
Specialty Paperboard Products Segment
Specialty Paperboard Products segment net sales decreased $16.5 million in the first quarter of fiscal 2009 from the prior year quarter to $75.3 million primarily due to decreased volumes and lower recycled fiber prices. Segment income decreased to $2.8 million compared to $7.4 million in the prior year quarter.
Cash Provided By Operating Activities
Net cash provided by operating activities in the first quarter of fiscal 2009 was $49.6 million compared to $22.3 million in the prior year quarter.
Financing and Investing Activities
We reduced net debt by $33.2 million in the quarter and $183.7 million in the nine months since March 31, 2008, following our acquisition of Southern Container. Our Credit Agreement Debt/EBITDA ratio was 3.5 times at December 31, 2008. We estimate that adjusted earnings per diluted share accretion from the acquisition were $0.42 in the quarter and $0.94 for the ten months following the March 2008 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 billion. The company has operations in the United States, Canada, Mexico, Chile and Argentina.