RockTenn Reports Third Quarter Fiscal 2014 Earnings

July 29, 2014 - RockTenn (NYSE:RKT) today reported earnings for the quarter ended June 30, 2014 of $1.82 per diluted share and adjusted earnings of $1.97 per diluted share.

Third Quarter Results

  • Net sales of $2,531 million for the third quarter of fiscal 2014 increased $83 million compared to the third quarter of fiscal 2013 primarily as a result of the Tacoma Mill and specialty display acquisitions completed in May 2014 and December 2013, respectively, and higher selling prices. Segment income of $263 million decreased $12 million compared to the prior year quarter primarily due to increased commodity and other costs which exceeded the impact of higher selling prices, productivity improvements and income from the acquisitions.
  • RockTenn's restructuring and other costs and operating losses and transition costs due to plant closures for the third quarter of fiscal 2014 were $0.13 per diluted share after-tax. These costs primarily consisted of $9 million of pre-tax integration and acquisition costs and $5 million of pre-tax facility closure charges associated with previously closed facilities.

Chief Executive Officer's Statement

RockTenn Chief Executive Officer, Steve Voorhees, stated, "Our team delivered another quarter of solid operating results as measured by our adjusted earnings per share of $1.97 and free cash flow per share of $2.82.  Over the last 12 months credit agreement EBITDA has increased to $1.6 billion, a 19% increase compared to last year and free cash flow has increased by $3.24 to $12.39 per share, a 35% increase, both of which reflect the continued strong operating performance of our team. Our balance sheet continues to provide us with the ability to make sound capital allocation decisions and continue to generate attractive free cash flow returns."

SEGMENT RESULTS

Mill and Converting Tons Shipped

Corrugated Packaging segment shipments of approximately 1,962,000 tons increased 2.1% or approximately 40,000 tons compared to the prior year. In the quarter, we took approximately 89,000 tons of major maintenance and capital outage downtime. Consumer Packagingsegment shipments of approximately 394,000 tons decreased 0.5% or approximately 2,000 tons compared to the prior year quarter.

Corrugated Packaging Segment

Corrugated Packaging segment net sales increased $55 million to $1,774 million and segment income decreased $16 million to $180 million in the third quarter of fiscal 2014 compared to the prior year quarter. The increased sales are primarily related to the Tacoma Mill acquisition and higher selling prices whose impact on segment income was more than offset by higher commodity and other costs. Segment income in the third quarter of fiscal 2014 included the recognition of a $9 million gain related to the recording of additional value of spare parts at our containerboard mills acquired in the Smurfit-Stone acquisition. Segment income in the third quarter of fiscal 2013 included an $11.4 million benefit related to the restructuring and extension of our Jacksonville recycled containerboard mill's steam supply contract.  Corrugated Packaging segment EBITDA margin was 17.4% for the third quarter of fiscal 2014 down 70 basis points from the prior year quarter.

Consumer Packaging Segment

Consumer Packaging segment net sales increased $15 million to $497 million in the third quarter of fiscal 2014 compared to the prior year quarter due to higher selling prices. Segment income of $60 million in the third quarter of fiscal 2014 was impacted primarily by the higher selling prices which were more than offset by the impact of lower volumes and higher commodity costs and other items. Consumer Packaging segment EBITDA margin was 16.5% for the third quarter of fiscal 2014 down slightly compared to the prior year quarter.

Merchandising Displays Segment

Merchandising Displays segment net sales increased $59 million over the prior year third quarter to $225 million primarily due to higher volumes and the impact of a specialty display acquisition completed in December 2013. Segment income increased $4 million in the third quarter of fiscal 2014 compared to the prior year quarter primarily due to the impact of higher volumes which were partially offset by higher commodity and other items including higher costs associated with supporting and onboarding new business. Merchandising Displays segment EBITDA margin was 11.3% for the third quarter of fiscal 2014 down 70 basis points from the prior year quarter.

Recycling Segment

Recycling segment net sales decreased $38 million over the prior year third quarter to $85 million primarily due to lower volumes and recovered fiber prices as a result of soft global markets and seven collection facility closures during the past year. Segment income was relatively flat in the third quarter of fiscal 2014 compared to the prior year quarter primarily as the impact of lower volumes and market conditions were partially offset by the impact of cost structure improvements.

Cash Provided From Operating, Financing and Investing Activities

Cash from operations was $218 million in the third quarter of fiscal 2014 after pension and postretirement funding more than expense of $131 million compared to cash from operations of $270 million in the prior year quarter after pension and postretirement funding more than expense of $45 million.  Due primarily to the $341 million associated with the May 16, 2014 acquisition of the Tacoma Mill, Net Debt (as defined) increased $312 million in the June quarter to $2.95 billion and at June 30, 2014, our Leverage Ratio (as defined) was 1.90 times. Total debt was $2.99 billion at June 30, 2014. Additionally during the quarter, we invested $151 million in capital expenditures, returned $25 million in dividends to our shareholders and repurchased $21 million of common stock.  

RockTenn is one of North America's leading integrated manufacturers of corrugated and consumer packaging. To learn more, please visit: www.rocktenn.com

SOURCE: RockTenn