RockTenn Reports Fiscal Fourth Quarter Results

Nov. 3, 2010 - RockTenn today reported earnings for the quarter ended September 30, 2010 of $2.31 per diluted share. The Company’s adjusted earnings were $1.64 per diluted share compared to the prior year quarter adjusted earnings of $1.19 per diluted share.

Fourth Quarter Results

  • Net sales of $806.8 million for the fourth quarter of fiscal 2010 increased $77.8 million, or 10.7% over the fourth quarter of fiscal 2009.
  • Segment income of $125.9 million was $18.4 million, or 17.1% over the prior year quarter excluding $21.4 million of alternative fuel mixture credit, net of expenses in the prior year quarter.
  • In the fourth quarter of fiscal 2010 we elected to claim the cellulosic biofuel producer credit for black liquor produced in calendar year 2009 instead of the alternative fuel mixture credit. Accordingly, we recorded a cellulosic biofuel producer credit, net of interest and previously claimed alternative fuel mixture credit, of $27.6 million, or $0.71 per diluted share, as a reduction of income tax expense. The cellulosic credit is a taxable credit of $1.01 per gallon as compared to the $0.50 per gallon non-taxable alternative fuel mixture credit.
  • RockTenn’s pre-tax restructuring and other costs, net of related noncontrolling interest, were $2.4 million, or $0.04 per diluted share after-tax, for the fourth quarter of fiscal 2010 consisting primarily of plant closing related asset impairments.
  • The effective tax rate for the fourth quarter of fiscal 2010, excluding the cellulosic biofuel producer credit, was 32.8%. Our normalized tax rate is approximately 35%. The impact of the lower 32.8% tax rate in the fourth quarter of fiscal 2010 increased earnings by $2.1 million, or $0.05 per diluted share. The lower effective tax rate was due primarily to the recognition of certain tax credits and reductions in reserves for uncertain tax positions.

CHAIRMAN AND CEO’S STATEMENT

RockTenn Chairman and Chief Executive Officer James A. Rubright stated, “RockTenn’s adjusted earnings of $1.64 per share increased 38% over the prior year quarter due to volume growth of 2% and higher operating margins, driven by continued operational excellence and higher product prices. Overall demand continued to be strong early in the December quarter and we believe that if current demand and recycled fiber costs continue at current levels throughout the fiscal year, adjusted earnings in fiscal 2011 will exceed adjusted earnings in fiscal 2010.”

SEGMENT RESULTS

Paperboard and Containerboard Tons Shipped and Average Price
Total tons shipped in the fourth quarter of fiscal 2010 increased by 17,352 tons over the prior year quarter and increased on a sequential quarter basis by 1,994 tons. The average selling price for all paperboard and containerboard grades increased $62 per ton from the prior year quarter and increased $15 per ton on a sequential quarter basis.

Consumer Packaging Segment
Consumer Packaging segment net sales increased 5.0% in the fourth quarter of fiscal 2010 compared to the prior year quarter, due to higher selling prices. Segment income was $57.7 million in the fourth quarter of fiscal 2010 and $53.2 million in the prior year quarter excluding $21.4 million of alternative fuel mixture credit, net of expenses in the prior year quarter.

Corrugated Packaging Segment
Corrugated Packaging segment net sales increased $32.3 million to $219.0 million in the fourth quarter of fiscal 2010 compared to the prior year quarter, due to higher volumes and increased containerboard selling prices. Segment income increased $11.1 million to $48.2 million in the fourth quarter of fiscal 2010 and segment return on sales was 22.0%.

Merchandising Displays Segment
Merchandising Displays segment net sales increased $18.2 million over the prior year fourth quarter. Segment income increased to $12.5 million in the fourth quarter of fiscal 2010 compared to $9.1 million in the prior year quarter, and segment return on sales was 12.3%.

Specialty Paperboard Products Segment
Specialty Paperboard Products segment net sales increased $11.7 million in the fourth quarter of fiscal 2010 compared to the prior year quarter primarily due to higher recycled fiber prices and volumes and increased paperboard volumes and selling prices. Segment income was $7.5 million in the fourth quarter of fiscal 2010 and $8.1 million in the prior year quarter.

CASH PROVIDED BY OPERATING ACTIVITIES

Net cash provided by operating activities in the fourth quarter of fiscal 2010 was $64.3 million compared to $117.4 million in the prior year quarter. The reduction was primarily due to our fourth quarter of fiscal 2010 election to claim the cellulosic biofuel producer credit for black liquor produced in calendar year 2009. As a result of that election, we paid $49.1 million of incremental state and federal income taxes in the fourth quarter of fiscal 2010 than we otherwise would have paid without claiming the cellulosic biofuel producer credit. As a result, we expect to reduce fiscal 2011 and 2012 cash tax payments by approximately $51 million and $26 million, respectively. The actual timing of the reduction in cash tax payments may vary due to changes in taxable income in those years.

FINANCING AND INVESTING ACTIVITIES

In the fourth quarter of fiscal 2010, we repurchased approximately seventy-five thousand shares of stock at an average purchase price of $48.32 per share. We reduced net debt by $222.7 million in the twelve months ended September 30, 2010. Our Credit Agreement Debt/EBITDA ratio was 2.17 times at September 30, 2010, well below our maximum credit agreement covenant of 3.75 times.

RockTenn is one of North America’s leading manufacturers of paperboard, containerboard and consumer and corrugated packaging, with annual net sales of $3 billion.

SOURCE: RockTenn