NORCROSS, Ga.--(BUSINESS WIRE)--Nov. 3, 2009-- RockTenn (NYSE:RKT) today reported earnings for the quarter ended September 30, 2009 of $1.72 per diluted share. The Company’s adjusted earnings were $1.21 per diluted share, excluding specific items related to the alternative fuel tax credit and restructuring charges. Adjusted earnings per diluted share increased 34% over the prior year quarter adjusted earnings of $0.90 per diluted share.

Fourth Quarter Results

• Net sales of $729.0 million for the fourth quarter of fiscal 2009 decreased $56.7 million over the fourth quarter of fiscal 2008.
• Segment income increased to $128.9 million compared to $90.3 million in the prior year quarter, a 43% increase over the prior year quarter. Segment income includes the alternative fuel tax credit of $21.4 million, net of expenses. This tax credit is scheduled to expire on December 31, 2009.
• RockTenn’s pre-tax restructuring and other costs, net of related minority interest, were $2.1 million, or $0.04 per diluted share after-tax, for the fourth quarter of fiscal 2009 consisting primarily of plant closing related asset impairments.

Chairman and Chief Executive Officer’s Statement

RockTenn Chairman and Chief Executive Officer James A. Rubright stated, “RockTenn delivered another quarter of strong earnings growth over the prior year quarter as adjusted earnings increased 34%. Our free cash flow continued to be strong, and our net debt repayment and dividends totaled $7.81 per share in fiscal 2009 as we capitalized on the low cost positions we have developed in all of our businesses. We expect to continue to generate strong cash flow in fiscal 2010 as we expect input costs to remain relatively stable, and demand for containerboard and bleached paperboard to improve.”

Segment Results

Paperboard and Containerboard Tons Shipped and Average Price

Total tons shipped in the fourth quarter of fiscal 2009 decreased by 15,647 tons over the prior year quarter and increased on a sequential quarter basis by 48,398 tons. The average selling price for all paperboard and containerboard grades decreased $28 per ton from the prior year quarter and decreased $7 per ton on a sequential quarter basis.

Consumer Packaging Segment

Consumer Packaging segment net sales increased 0.3% in the fourth quarter of fiscal 2009 compared to the prior year quarter, due to higher folding carton volumes partially offset by lower paperboard volumes. Segment income increased $43.9 million over the prior year quarter to $74.6 million due primarily to $21.4 million of alternative fuel tax credit, lower recycled fiber and energy costs and greater income contributed from our folding carton business.

Corrugated Packaging Segment

Corrugated Packaging segment net sales decreased $38.5 million to $186.7 million in the fourth quarter of fiscal 2009 compared to the prior year quarter, due to lower volumes. Segment income was $37.1 million in the fourth quarter of fiscal 2009 and segment return on sales was 19.9%.

Merchandising Displays Segment

Merchandising Displays segment net sales decreased $5.2 million over the prior year fourth quarter. Segment income was $9.1 million in the fourth quarter of fiscal 2009 and $11.7 million in the prior year quarter.

Specialty Paperboard Products Segment

Specialty Paperboard Products segment net sales decreased $15.0 million in the fourth quarter of fiscal 2009 compared to the prior year quarter primarily due to decreased volumes and lower recycled fiber prices. Segment income was $8.1 million in the fourth quarter of fiscal 2009 and $8.5 million in the prior year quarter.

Cash Provided By Operating Activities

Net cash provided by operating activities in the fourth quarter of fiscal 2009 was $117.3 million compared to $83.9 million in the prior year quarter. Cash from operations was reduced by the voluntary contribution of $16 million to our pension plans in the quarter, bringing our total contributions in the fiscal year to $40 million.

Financing and Investing Activities

We reduced net debt by $78.3 million in the quarter and $286.5 million in the twelve months ended September 30, 2009. Our Credit Agreement Debt/EBITDA ratio was 2.36 times at September 30, 2009. On August 14, 2009 we amended our receivables-backed financing facility to increase the facility to $135 million. The amended facility continues to expire on July 13, 2012.

Conference Call

We will host a conference call to discuss our results of operations for the fourth quarter of fiscal 2009 and other topics that may be raised during the discussion at 9:00 a.m., Eastern Time, on November 4, 2009. The conference call will be webcast and can be accessed, along with a copy of this press release, at www.rocktenn.com.

About RockTenn

RockTenn (NYSE:RKT) is one of North America’s leading manufacturers of paperboard, containerboard and consumer and corrugated packaging, with annual net sales of approximately $2.8 billion. The Company operates locations in the United States, Canada, Mexico, Chile and Argentina. For more information, visit www.rocktenn.com.

Cautionary Statements

Statements herein regarding, among others, expected relatively stable input costs, improvement in demand for containerboard and bleached paperboard and our ability to generate strong cash flows constitute forward-looking statements within the meaning of the federal securities laws. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement. With respect to these statements, we have made assumptions regarding, among other things, expected economic, competitive and market conditions generally; expected volumes and price levels of purchases by customers; recycled fiber and energy costs; costs associated with facility closures; competitive conditions in our businesses and possible adverse actions of our customers, our competitors and suppliers. Management believes its assumptions are reasonable; however, undue reliance should not be placed on these estimates, which are based on current expectations. There are many factors that impact these forward-looking statements that we cannot predict accurately. Further, our business is subject to a number of general risks that would affect any such forward-looking statements including, among others, decreases in demand for our products; increases in energy, raw materials, shipping and capital equipment costs; reduced supply of raw materials; fluctuations in selling prices and volumes; intense competition; the potential loss of certain key customers; and adverse changes in general market and industry conditions. These risks are more particularly described in our filings with the Securities and Exchange Commission, including under the caption “Business―Forward-Looking Information” and “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2008. The information contained in this release speaks as of the date hereof and we do not undertake any obligation to update this information as future events unfold.

Non-GAAP Measures and Reconciliations

We have included financial measures that are not prepared in accordance with GAAP. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Below, we define the non-GAAP financial measures, provide a reconciliation of each non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP, and discuss the reasons that we believe this information is useful to management and may be useful to investors. These measures may differ from similarly captioned measures of other companies in our industry. The following non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such.

Net Debt

We have defined the non-GAAP measure “net debt” to include the aggregate debt obligations reflected in our consolidated balance sheet, less the hedge adjustments resulting from terminated fair value interest rate derivatives or swaps, the balance of our cash and cash equivalents, restricted cash (which includes restricted cash and marketable debt securities) and certain other investments that we consider to be readily available to satisfy these debt obligations.

Our management uses net debt, along with other factors, including net debt repayment per diluted share, to evaluate our financial condition. We believe that net debt is an appropriate supplemental measure of financial condition because it provides a more complete understanding of our financial condition before the impact of our decisions regarding the appropriate use of cash and liquid investments and net debt repayment per diluted share provides a measure to investors of how successful we are at achieving our debt reduction. Set forth below is a reconciliation of net debt to the most directly comparable GAAP measures, Current Portion of Debt and Total Long-Term Debt for the current quarter, prior quarter, one year ago quarter and the quarter following the Southern Container Acquisition:

Set forth below is a reconciliation of Net Debt Repayment and Dividends. Net Debt Repayment is derived from the table above, as described above and dividends are from the cash flow line item Cash dividends paid to shareholders:

Credit Agreement EBITDA and Total Funded Debt

“Credit Agreement EBITDA” is calculated in accordance with the definition contained in our Senior Credit Facility. Credit Agreement EBITDA is generally defined as Consolidated Net Income plus: consolidated interest expense, income taxes of the consolidated companies determined in accordance with GAAP, depreciation and amortization expense of the consolidated companies determined in accordance with GAAP, certain non-cash and cash charges incurred, and charges taken resulting from the impact of changes to accounting rules related to the expensing of stock options.

“Total Funded Debt” is calculated in accordance with the definition contained in our Senior Credit Facility. Total Funded Debt is generally defined as aggregate debt obligations reflected in our balance sheet, less the hedge adjustments resulting from terminated and existing fair value interest rate derivatives or swaps, less certain deferred cash, plus additional outstanding letters of credit not already reflected in debt and certain guarantees.

Our management uses Credit Agreement EBITDA and Total Funded Debt to evaluate compliance with our debt covenants and borrowing capacity available under our Senior Credit Facility. Management believes that investors also use these measures to evaluate our compliance with our debt covenants and available borrowing capacity. Borrowing capacity is dependent upon, in addition to other measures, the “Credit Agreement Debt/EBITDA ratio” or the “Leverage Ratio,” which is defined as Total Funded Debt divided by Credit Agreement EBITDA. As of the September 30, 2009 calculation, our Leverage Ratio was 2.36 times, which includes a reduction of .24 times for the alternative fuel tax credit. Our maximum permitted Leverage Ratio under the Senior Credit Facility at September 30, 2009 was 4.25 times and will remain at this level until July 1, 2010 when it will re-set to 3.75 times.

Set forth below is a reconciliation of Credit Agreement EBITDA for the three and twelve months ended September 30, 2009, to the most directly comparable GAAP measure, Net Income:

Set forth below is a reconciliation of Total Funded Debt to the most directly comparable GAAP measures, Current Portion of Debt and Total Long-Term Debt:

Adjusted Net Income and Adjusted Earnings per Diluted Share

We also use the non-GAAP measures “adjusted net income” and “adjusted earnings per diluted share”. Management believes these non-GAAP financial measures provide our board of directors, investors, potential investors, securities analysts and others with useful information to evaluate the performance of the Company because it excludes restructuring and other costs, net, and other specific items that management believes are not indicative of the ongoing operating results of the business. The Company and the board of directors use this information to evaluate the Company’s performance relative to other periods. We believe that the most directly comparable GAAP measures to adjusted net income and adjusted earnings per diluted share are Net Income and Earnings per Diluted Share, respectively. Set forth is a reconciliation of adjusted net income to Net Income:

Source: RockTenn

RockTenn
John Stakel, VP-Treasurer, 678-291-7900