RockTenn Reports 35% Increase in Second Quarter Fiscal 2015 Earnings

April 29, 2015 - RockTenn (RKT) today reported earnings for the quarter ended March 31, 2015 of $0.77 per diluted share and adjusted earnings of $0.85 per diluted share.

RockTenn Chief Executive Officer, Steve Voorhees, stated, "Our adjusted earnings per share of $0.85 significantly exceeded the $0.63 in the prior year quarter and our most recent earnings guidance due to strong revenue and operating performance late in the month across all of our businesses. Our free cash flow of $1.11 per share in the quarter and $5.86 per share for the past twelve months, when combined with our leverage ratio of 1.74 times at March 31, provides a solid foundation for us to build on as we expect to complete the merger with MWV in June.

"The merger integration work we have underway is confirming the outstanding and complementary capabilities that we will have in the new company to serve packaging markets around the globe and create long-term shareowner value."

SECOND QUARTER RESULTS

Net sales of $2,456 million for the second quarter of fiscal 2015 increased $62 million compared to the second quarter of fiscal 2014 as a result of sales from the Tacoma Mill acquisition completed in fiscal 2014 and higher corrugated volumes.

Segment income of $222 million for the second quarter of fiscal 2015 increased $20 million compared to the prior year quarter. The increase in segment income was primarily due to the achievement of an estimated $22 million in productivity improvements, lower fiber and energy prices, less weather disruption than in the prior year quarter and higher corrugated volumes which were partially offset by decreased corrugated selling prices, lower merchandising displays income and other costs across our business.

SEGMENT RESULTS

Mill and Converting Tons Shipped

Corrugated Packaging segment shipments of approximately 1,937,000 tons increased approximately 127,000 tons or 7.0% compared to the prior year quarter primarily as a result of the Tacoma Mill acquisition, and 2.0% excluding the acquisition. Consumer Packaging segment shipments of approximately 379,000 tons decreased 1.9% or approximately 8,000 tons compared to the prior year quarter primarily due to this quarter's planned major maintenance outage at our Demopolis, AL bleached paperboard mill.

Corrugated Packaging Segment

Corrugated Packaging segment net sales increased $76 million to $1,728 million in the second quarter of fiscal 2015 compared to the prior year quarter primarily due to sales from the Tacoma Mill acquisition and increased corrugated segment shipments. Segment income increased $37 million to $170 million in the second quarter of fiscal 2015 compared to the prior year quarter primarily due to higher volumes, including the Tacoma Mill acquisition and increased exports, as well as productivity improvements and the impact of lower commodity and other costs, including the reduced impact of weather compared to the prior year quarter, which were partially offset by a substantial electrical failure at our Panama City, FL containerboard mill. The impact of the severe weather in February, compared to expectations, for Corrugated Packaging in the second quarter of fiscal 2015 was an estimated $9 million pre-tax compared to an estimated $35 million pre-tax in the second quarter of fiscal 2014. Segment income in the second quarter of fiscal 2015 included the recognition of a $5 million gain related to the recording of additional value of spare parts at our containerboard mills acquired in the Smurfit-Stone acquisition. Corrugated Packaging segment EBITDA margin was 17.3% for the second quarter of fiscal 2015 compared to 15.2% in the prior year quarter.

Consumer Packaging Segment

Consumer Packaging segment net sales decreased $4 million to $486 million in the second quarter of fiscal 2015 compared to the prior year quarter primarily due to the impact of the planned major maintenance outage at our Demopolis, AL bleached paperboard mill which was partially offset by increased folding carton sales. Segment income decreased $2 million to $48 million in the second quarter of fiscal 2015 primarily reflecting the impact of higher manufacturing costs which exceeded the impact of lower fiber and energy costs and the reduced impact of weather compared to the prior year quarter. The impact of the severe weather in February, compared to expectations, for Consumer Packaging in the second quarter of fiscal 2015 was an estimated $2 million pre-tax compared to an estimated $8 million pre-tax in the second quarter of fiscal 2014. Consumer Packaging segment EBITDA margin was 14.4% for the second quarter of fiscal 2015.

Merchandising Displays Segment

Merchandising Displays segment net sales in the second quarter of fiscal 2015 of $213 million were relatively flat compared to the prior year second quarter as higher volumes from the two display acquisitions completed in fiscal 2014 were offset by lower promotional activity. Segment income was $5 million in the second quarter of fiscal 2015 primarily due to higher costs, including costs associated with supporting new business that was onboarded in fiscal 2014 and a more competitive commercial environment. Merchandising Displays segment EBITDA margin was 4.9% for the second quarter of fiscal 2015.

Recycling Segment

Recycling segment net sales decreased $14 million over the prior year second quarter to $76 million primarily due to lower recovered fiber prices as a result of soft global markets and the impact of the west coast port slowdown and collection facility closures during the past year which were partially offset by higher volumes. Segment income decreased $3 million in the second quarter of fiscal 2015 compared to the prior year quarter.

Cash Provided From Operating, Financing and Investing Activities

Cash from operations was $218 million in the second quarter of fiscal 2015, an $8 million decrease over the prior year quarter. Net Debt (as defined) decreased $65 million in the March quarter to $2.71 billion and at March 31, 2015, our Leverage Ratio (as defined) was 1.74 times. Total debt was $2.75 billion at March 31, 2015.

During the quarter, we invested $108 million in capital expenditures and returned $45 million in capital to our shareholders in dividends.

Restructuring and Other Costs and Operating Losses and Transition Costs due to Plant Closures

RockTenn's restructuring and other costs and operating losses and transition costs due to plant closures for the second quarter of fiscal 2015 were $0.08 per diluted share after-tax. These costs primarily consisted of $14 million of pre-tax acquisition and integration costs largely associated with the proposed transaction with MeadWestvaco and $3 million of pre-tax facility closure charges. The facility closure charges were primarily associated with on-going closure costs for previously closed facilities.

RockTenn (RKT) is one of North America's leading providers of packaging solutions and manufacturers of containerboard and paperboard. The Company operates locations in the United States, Canada, Mexico, Chile and Argentina. To learn more, please visit: www.rocktenn.com

SOURCE: RockTenn