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Press release from GlobeNewswire (a Nasdaq OMX company)

RockTenn Reports Second Quarter Fiscal 2013 Results

Tuesday, April 23, 2013

RockTenn Reports Second Quarter Fiscal 2013 Results

14:19 EDT Tuesday, April 23, 2013

NORCROSS, Ga., April 23, 2013 (GLOBE NEWSWIRE) -- RockTenn (NYSE:RKT) today reported earnings for the quarter ended March 31, 2013 of $4.45 per diluted share and adjusted earnings of $1.12 per diluted share. Adjusted earnings per share increased 15% over the prior year quarter.

 
  Three Months
Ended
March 31,
2013
Three Months
Ended
March 31,
2012
Six Months
Ended
March 31,
2013
Six Months
Ended
March 31,
2012
         
Earnings per diluted share  $ 4.45  $ 0.44  $ 5.64  $ 1.50
         
Alternative fuel mixture credit tax reserve adjustment  (3.47)  ―  (3.47)  ―
Restructuring and other costs and operating losses and transition costs due to plant closures 0.14    0.36 0.30 0.48
Loss on extinguishment of debt  0.17  ―  0.17
 
Adjusted earnings per diluted share $ 1.12  $ 0.97  $ 2.47  $ 2.15

Second Quarter Results

  • Net sales of $2,325 million for the second quarter of fiscal 2013 increased $42 million compared to the second quarter of fiscal 2012. Segment income of $174 million increased $10 million or 6% over the prior year quarter adjusted to eliminate $7 million of pre-tax losses in the prior year quarter due to our Matane, Quebec containerboard mill.
  • RockTenn's income tax benefit during the quarter was primarily due to the reversal of previously established tax reserves of $254 million relating to alternative fuel mixture credits acquired in the Smurfit-Stone Acquisition following the Internal Revenue Service's completion of its examination of the Smurfit-Stone 2009 tax return.
  • RockTenn's restructuring and other costs and operating losses and transition costs due to plant closures were $0.14 per diluted share after-tax, for the second quarter of fiscal 2013. These costs consisted primarily of $8 million of pre-tax facility closure charges and $4 million of pre-tax integration costs.

Chairman and Chief Executive Officer's Statement

RockTenn Chairman and Chief Executive Officer James A. Rubright stated, "RockTenn's strong earnings growth over the prior year quarter reflects continued improvements in our operating performance and higher containerboard and box pricing. Our supply chain performed well managing constrained containerboard supply during the first half of our spring outage season and our box plants performance improved as we have consolidated our system and grown our sales and unit pricing in a relatively flat domestic market."

Segment Results

Containerboard and Paperboard Tons Shipped  

Corrugated Packaging segment tons shipped increased approximately 28,000 tons over the prior year quarter due to increased domestic sales.  Consumer Packaging segment paperboard and pulp shipments of approximately 339,000 tons decreased approximately 10,000 tons over the prior year quarter primarily due to the planned major maintenance outage at our Demopolis, AL bleached paperboard mill.

Corrugated Packaging Segment

Corrugated Packaging segment net sales increased $103 million to $1,608 million and segment income adjusted to eliminate $7 million of pre-tax losses at our closed Matane, Quebec containerboard mill, increased $32 million to $108 million in the second quarter of fiscal 2013 compared to the prior year quarter. The increased sales and earnings are primarily related to higher selling prices and containerboard volume, partially offset by higher operating expenses including $12 million of incremental maintenance outage expense. Corrugated Packaging segment EBITDA margin was 13.4% for the second quarter of fiscal 2013.

Consumer Packaging Segment

Consumer Packaging segment net sales decreased $21 million and segment income declined $21 million in the second quarter of fiscal 2013 compared to the prior year quarter due primarily to generally lower selling prices, lower display sales and lower bleached paperboard volume due to the planned major maintenance outage at our Demopolis bleached paperboard mill. Consumer Packaging segment EBITDA margin was 14.0% for the second quarter of fiscal 2013.

Recycling Segment

Recycling segment net sales decreased $25 million over the prior year second quarter to $271 million primarily as a result of lower volume. Segment income decreased $1 million to $4 million in the second quarter of fiscal 2013 compared to the prior year quarter. Recycling segment EBITDA margin was 2.5% for the second quarter of fiscal 2013.

Cash Provided From Operating, Financing and Investing Activities

Cash provided by operations was $175 million in the second quarter of fiscal 2013, after pension funding in excess of expense of $30 million. We reduced net debt (as defined) by $92 million in the March quarter to $3.13 billion and our Leverage Ratio (as defined) was 2.65 times.  Total debt was $3.18 billion at March 31, 2013. We invested $102 million in capital expenditures. 

Conference Call

We will host a conference call to discuss our results of operations for the second quarter of fiscal 2013 and other topics that may be raised during the discussion at 9:00 a.m., Eastern Time, on April 24, 2013. The conference call will be webcast live with an accompanying slide presentation, along with a copy of this press release, at www.rocktenn.com.

Investors who wish to participate in the webcast via teleconference should dial 888-790-4710 (inside the U.S.) or 773-756-0961 (outside the U.S.) at least 15 minutes prior to the start of the call and enter the passcode ROCKTENN. Replays of the call will be available through May 8, 2013 and can be accessed at 866-351-2785 (U.S. callers) and 203-369-0055 (outside the U.S.).

About RockTenn

RockTenn (NYSE:RKT) is one of North America's leading integrated manufacturers of corrugated and consumer packaging. RockTenn's 26,000 employees are committed to exceeding their customers' expectations – every time. The Company operates locations in the United States, Canada, Mexico, Chile, Argentina and China. For more information, visit www.rocktenn.com.

ROCK-TENN COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
         
         
         
  FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
  March 31,
2013
March 31,
2012
March 31,
2013
March 31,
2012
         
         
NET SALES  $ 2,324.9  $ 2,282.9  $ 4,612.0  $ 4,550.6
         
Cost of Goods Sold   1,939.7  1,922.1  3,817.3  3,797.6
         
         
Gross Profit  385.2  360.8  794.7  753.0
Selling, General and Administrative Expenses   237.4  229.6  460.4  455.5
Restructuring and Other Costs, net  12.4  28.1  28.5  38.4
         
         
Operating Profit  135.4  103.1  305.8  259.1
Interest Expense  (27.2)  (32.2)  (56.3)  (64.9)
Loss on Extinguishment of Debt   (0.1)  (19.5)  (0.3)  (19.5)
Interest Income and Other Income (Expense), net  (0.1)  0.5  (0.1)  0.9
Equity in Income of Unconsolidated Entities  1.1  1.4  1.7  2.1
         
         
INCOME BEFORE INCOME TAXES  109.1  53.3  250.8  177.7
         
Income Tax Benefit (Expense)  216.5  (20.6)  161.7  (68.2)
         
         
CONSOLIDATED NET INCOME  325.6  32.7  412.5  109.5
         
         
Less: Net Income Attributable to Noncontrolling Interests  (0.9)  (0.8)  (1.8)  (0.9)
         
         
NET INCOME ATTRIBUTABLE TO ROCK-TENN COMPANY SHAREHOLDERS  $ 324.7  $ 31.9  $ 410.7  $ 108.6
         
         
Computation of diluted earnings per share under the two-class method (in millions, except per share data):
         
Net income attributable to Rock-Tenn Company shareholders  $ 324.7  $ 31.9  $ 410.7  $ 108.6
Less: Distributed and undistributed income available to participating securities  --   (0.2)  (0.1)  (0.6)
Distributed and undistributed income available to Rock-Tenn Company shareholders  $ 324.7  $ 31.7  $ 410.6  $ 108.0
         
Diluted weighted average shares outstanding  72.9  71.9  72.8  71.8
         
Diluted earnings per share  $ 4.45  $ 0.44  $ 5.64  $ 1.50
 
ROCK-TENN COMPANY
SEGMENT INFORMATION
(UNAUDITED)
(IN MILLIONS)
         
         
         
  FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
  March 31,
2013
March 31,
2012
March 31,
2013
March 31,
2012
         
         
NET SALES:        
         
Corrugated Packaging  $ 1,608.4  $ 1,505.9  $ 3,198.3  $ 3,028.7
Consumer Packaging  626.5  647.6  1,237.8  1,268.0
Recycling  271.0  296.1  522.8  625.5
Intersegment Eliminations  (181.0)  (166.7)  (346.9)  (371.6)
         
         
TOTAL NET SALES  $ 2,324.9  $ 2,282.9  $ 4,612.0  $ 4,550.6
         
         
SEGMENT INCOME:        
         
Corrugated Packaging (1)  $ 107.7  $ 68.7  $ 245.5  $ 178.0
Consumer Packaging   63.1  84.4  129.6  164.7
Recycling  3.5  4.2  7.8  7.7
         
         
TOTAL SEGMENT INCOME  $ 174.3  $ 157.3  $ 382.9  $ 350.4
         
         
Restructuring and Other Costs, net  (12.4)  (28.1)  (28.5)  (38.4)
Non-Allocated Expenses  (25.4)  (24.7)  (46.9)  (50.8)
Interest Expense  (27.2)  (32.2)  (56.3)  (64.9)
Loss on Extinguishment of Debt   (0.1)  (19.5)  (0.3)  (19.5)
Interest Income and Other Income (Expense), net  (0.1)  0.5  (0.1)  0.9
         
         
INCOME BEFORE INCOME TAXES  $ 109.1  $ 53.3  $ 250.8  $ 177.7
         
         
(1) After $6.7 million of pre-tax losses at our Matane, Quebec containerboard mill in the three and six months ended March 31, 2012 and after inventory step-up expense of $0.4 million pre-tax in the six months ended March 31, 2012.  
 
ROCK-TENN COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN MILLIONS)
         
   FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
  March 31,
2013
March 31,
2012
March 31,
2013
March 31,
2012
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Consolidated net income  $ 325.6  $ 32.7  $ 412.5  $ 109.5
Adjustments to reconcile consolidated net income to net cash provided by operating activities:    
Depreciation and amortization  139.2  132.6  277.3  265.3
Deferred income tax (benefit) expense  (218.9)  17.9  (168.7)  60.8
Loss on extinguishment of debt   0.1  19.5  0.3  19.5
Share-based compensation expense  15.9  6.5  22.7  11.8
Gain on disposal of plant and equipment and other, net  (6.2)  (5.4)  (5.5)  (6.0)
Equity in income of unconsolidated entities  (1.1)  (1.4)  (1.7)  (2.1)
Settlement of interest rate swaps  --   --   --   (2.8)
Pension funding more than expense  (29.7)  (40.0)  (42.5)  (108.2)
Impairment adjustments and other non-cash items  3.4  13.9  6.1  15.5
Changes in operating assets and liabilities, net of acquisitions:        
Accounts receivable  (69.6)  (58.5)  5.1  73.7
Inventories  2.2  12.9  (47.0)  (56.5)
Other assets  (45.7)  (21.8)  (34.7)  (32.7)
Accounts payable  66.8  30.5  35.0  (26.3)
Income taxes  (5.4)  7.2  (13.7)  15.5
Accrued liabilities and other  (1.5)  46.1  7.4  0.8
NET CASH PROVIDED BY OPERATING ACTIVITIES  175.1  192.7  452.6  337.8
         
INVESTING ACTIVITIES:        
         
Capital expenditures  (102.0)  (120.6)  (194.0)  (202.2)
Cash paid for purchase of businesses, net of cash acquired  --   --   --   (87.5)
Investment in unconsolidated entities  --   (0.1)  --   (1.7)
Return of capital from unconsolidated entities  0.2  0.4  0.6  1.1
Proceeds from sale of property, plant and equipment   4.7  20.9  7.3  32.6
Proceeds from property, plant and equipment insurance settlement  5.7  --   5.7  -- 
NET CASH USED FOR INVESTING ACTIVITIES   (91.4)  (99.4)  (180.4)  (257.7)
         
FINANCING ACTIVITIES:        
         
Proceeds from issuance of notes  --   748.9  --   748.9
Additions to revolving credit facilities  22.7  106.3  54.5  210.7
Repayments of revolving credit facilities  (37.3)  (41.0)  (51.8)  (80.9)
Additions to debt  45.1  257.0  195.2  283.0
Repayments of debt  (96.9)  (1,145.4)  (423.8)  (1,208.7)
Debt issuance costs  (0.3)  (4.9)  (1.6)  (5.7)
Cash paid for debt extinguishment costs  (0.1)  (13.9)  (0.1)  (13.9)
Issuances of common stock, net of related minimum tax withholdings  4.2  (3.7)  (0.6)  (1.7)
Excess tax benefits from share-based compensation  (0.2)  7.9  4.2  7.9
Advances from unconsolidated entity  0.3  0.9  0.3  0.4
Cash dividends paid to shareholders  --   (14.1)  (32.1)  (28.2)
Cash distributions to noncontrolling interests  (1.0)  --   (2.3)  -- 
NET CASH USED FOR FINANCING ACTIVITIES  (63.5)  (102.0)  (258.1)  (88.2)
         
Effect of exchange rate changes on cash and cash equivalents  0.1  2.6  --   1.3
         
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  20.3  (6.1)  14.1  (6.8)
         
Cash and cash equivalents at beginning of period  31.0  41.0  37.2  41.7
         
Cash and cash equivalents at end of period  $ 51.3  $ 34.9  $ 51.3  $ 34.9
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:      
Cash paid (received) during the period for:        
Income taxes, net of refunds  $ 3.8  $ (13.0)  $ 12.2  $ (16.6)
Interest, net of amounts capitalized  42.7  36.5  52.0  60.1
 
ROCK-TENN COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN MILLIONS)
     
     
  March 31, September 30,
  2013 2012
     
     
ASSETS
CURRENT ASSETS:    
Cash and cash equivalents  $ 51.3  $ 37.2
Restricted cash  9.3  40.6
Accounts receivable (net of allowances of $26.7 and $26.9)  1,067.4  1,075.6
Inventories  905.3  861.9
Other current assets  210.5  174.5
     
     
TOTAL CURRENT ASSETS  2,243.8  2,189.8
     
     
Property, plant and equipment at cost:    
Land and buildings  1,206.9  1,207.7
Machinery and equipment  6,270.1  6,121.7
Transportation equipment  14.9  13.6
Leasehold improvements  23.4  20.0
   7,515.3  7,363.0
Less accumulated depreciation and amortization  (1,956.3)  (1,751.6)
Net property, plant and equipment  5,559.0  5,611.4
Goodwill  1,863.6  1,865.3
Intangibles, net  749.5  795.1
Other assets  228.7  225.5
     
     
TOTAL ASSETS  $ 10,644.6  $ 10,687.1
     
     
LIABILITIES AND EQUITY    
CURRENT LIABILITES:    
Current portion of debt  $ 29.7  $ 261.3
Accounts payable  754.6  708.9
Accrued compensation and benefits  203.2  211.4
Other current liabilities  198.9  226.7
     
     
TOTAL CURRENT LIABILITIES  1,186.4  1,408.3
     
     
Long-term debt due after one year  3,149.3  3,151.2
Pension liabilities  1,424.7  1,493.1
Postretirement medical liabilities  150.0  154.2
Deferred income taxes  727.0  888.8
Other long-term liabilities  174.2  173.9
Redeemable noncontrolling interests  11.5  11.4
     
Total Rock-Tenn Company shareholders' equity  3,821.1  3,405.7
Noncontrolling interests  0.4  0.5
Total Equity  3,821.5  3,406.2
     
     
TOTAL LIABILITIES AND EQUITY  $ 10,644.6  $ 10,687.1
           
Rock-Tenn Company Quarterly Statistics          
           
Key Financial Statistics          
(In Millions, Unless Otherwise Specified)          
           
  1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Fiscal Year
           
Net Income (Loss) Attributable to Rock-Tenn Company Shareholders      
2011  $ 50.3  $ 37.0  $ (30.1)  $ 83.9  $ 141.1
2012  76.7  31.9  58.2  82.3  249.1
2013  86.0  326.4      
           
Diluted Earnings (Loss) per Share          
2011  $ 1.27  $ 0.92  $ (0.60)  $ 1.17  $ 2.77
2012  1.06  0.44  0.81  1.14  3.45
2013  1.18  4.45      
           
Depreciation & Amortization          
2011  $ 36.7  $ 37.2  $ 73.5  $ 130.9  $ 278.3
2012  132.7  132.6  131.4  137.6  534.3
2013  138.1  139.2      
           
Capital Expenditures          
2011  $ 28.5  $ 30.3  $ 48.7  $ 91.9  $ 199.4
2012  81.6  120.6  146.1  104.1  452.4
2013  92.0  102.0      
           
Mill System Operating Rates          
2011 95.4% 98.3% 96.7% 99.1% 97.9%
2012 96.4% 90.6% 92.4% 97.7% 94.3%
2013 97.6% 96.1%      
               
Rock-Tenn Company Quarterly Statistics              
                   
Segment Operating Statistics                  
(Sales and Income In Millions, Shipments in Thousands of Tons Unless Otherwise Specified)  
                   
  1st Quarter   2nd Quarter   3rd Quarter   4th Quarter   Fiscal Year
Corrugated Packaging Segment Sales                  
2011  $ 198.3    $ 209.4    $ 734.5    $ 1,626.5    $ 2,768.7
2012  1,522.8    1,505.9    1,545.2    1,597.3    6,171.2
2013  1,589.9    1,608.4            
                   
Corrugated Packaging Intersegment Sales                  
2011  $ 9.4    $ 11.1    $ 21.3    $ 39.9    $ 81.7
2012  32.3    30.8    28.7    29.8    121.6
2013  28.2    28.4            
                   
Corrugated Packaging Segment Income                  
2011  $ 37.4    $ 30.1    $ 80.0 (1)  $ 153.6 (2)  $ 301.1
2012  109.7 (3)  75.4 (4)  73.6 (5)  112.8 (6)  371.5
2013  137.8    107.7            
                   
Return On Sales                  
2011 18.9%   14.4%   10.9% (1) 9.4% (2) 10.9%
2012 7.2% (3) 5.0% (4) 4.8% (5) 7.1% (6) 6.0%
2013 8.7%   6.7%            
                   
Containerboard Shipments (7)                  
2011 247.4   243.9   850.7   1,914.4    3,256.4
2012 1,832.0   1,695.9   1,722.9   1,859.1    7,109.9
2013 1,816.6   1,721.1            
                   
Bleached Linerboard Shipments                  
2011  --     --     12.9    29.8    42.7
2012  29.3    28.5    32.3    31.0    121.1
2013  30.2    30.9            
                   
Pulp Shipments                  
2011  --     --     28.7    71.2    99.9
2012  75.0    61.5    73.8    77.0    287.3
2013  73.4    62.1            
                   
Corrugated Containers Shipments - BSF (8)                  
2011  2.6    2.9    9.1    19.3    33.9
2012  19.0    19.1    19.5    19.7    77.3
2013  19.2    18.9            
                   
Corrugated Containers Per Shipping Day - MMSF (8)              
2011  43.1    45.2    144.7    301.4    134.6
2012  317.2    298.3    309.3    313.0    309.3
2013  314.1    305.4            
                   
(1) Excludes $55.4 million of inventory step-up expense.              
(2) Excludes $4.0 million of inventory step-up expense.              
(3) Excludes $0.4 million of inventory step-up expense.              
(4) Excludes $6.7 million of operating losses at the recently closed Matane, Quebec containerboard mill.  
(5) Excludes $0.2 million of inventory step-up expense.              
(6) Excludes $0.2 million of inventory step-up expense.              
(7) Includes Kraft Paper of 7.3, 18.7, 2.7 and 0.5 in fiscal 3q11, 4q11, 1q12 and 2q12, respectively.  
(8) MMSF - millions of square feet and BSF - billons of square feet          
         
Rock-Tenn Company Quarterly Statistics        
           
Segment Operating Statistics          
(Sales and Income In Millions, Shipments in Thousands of Tons Unless Otherwise Specified)  
           
  1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Fiscal Year
Consumer Packaging Segment Sales          
2011  $ 544.5  $ 567.8  $ 579.6  $ 667.9  $ 2,359.8
2012  620.4  647.6  628.9  660.6  2,557.5
2013  611.3  626.5      
           
Consumer Packaging Intersegment Sales          
2011  $ 3.8  $ 3.9  $ 6.8  $ 9.0  $ 23.5
2012  7.6  6.2  6.1  5.3  25.2
2013  6.4  6.1      
           
Consumer Packaging Segment Income          
2011  $ 71.0  $ 61.0  $ 61.1  $ 82.1  $ 275.2
2012  80.3  84.4  83.7  98.8  347.2
2013  66.5  63.1      
           
Return on Sales          
2011 13.0% 10.7% 10.5% 12.3% 11.7%
2012 12.9% 13.0% 13.3% 15.0% 13.6%
2013 10.9% 10.1%      
           
Recycled Paperboard Shipments (1)          
2011 224.5 239.3 238.2 241.0 943.0
2012 222.8 236.8 231.8 237.9 929.3
2013 231.5 241.1      
           
Bleached Paperboard Shipments          
2011 84.4 85.1 77.4 88.0 334.9
2012 83.8 87.4 91.5 90.3  353.0
2013 87.6 79.0      
           
Pulp Shipments          
2011 22.1 24.0 20.9 25.1 92.1
2012 24.9 25.1 24.3 21.9 96.2
2013 26.7 18.9      
           
Consumer Packaging Converting Shipments - BSF (2)        
2011  5.0  5.2  5.2  5.3  20.7
2012  5.0  5.2  5.1  5.2  20.5
2013  4.9  5.2      
           
Consumer Packaging Converting Per Shipping Day - MMSF (2)      
2011  82.2  83.0  82.1  82.5  82.4
2012  83.5  81.0  80.6  83.1  82.0
2013  81.0  83.9      
           
(1) Recycled paperboard tons include coated and specialty paperboard, including gypsum paperboard liner tons by Seven Hills Paperboard LLC, our unconsolidated joint venture with Lafarge North America, Inc. 
(2) MMSF - millions of square feet and BSF - billons of square feet      
         
Rock-Tenn Company Quarterly Statistics        
           
Segment Operating Statistics          
(Sales and Income In Millions, Shipments in Thousands of Tons Unless Otherwise Specified)  
           
  1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Fiscal Year
Recycling Segment Sales        
2011  $ 41.9  $ 40.8  $ 147.4  $ 355.8  $ 585.9
2012  329.4  296.1  338.9  264.4  1,228.8
2013  251.8  271.0      
         
Recycling Intersegment Sales        
2011  $ 10.4  $ 10.1  $ 51.3  $ 137.8  $ 209.6
2012  165.0  129.7  175.0  133.4  603.1
2013  131.3  146.5      
         
Recycling Segment Income        
2011  $ 2.3  $ 2.6  $ 4.6  $ 5.3  $ 14.8
2012  3.5  4.2  2.2  (2.8)  7.1
2013  4.3  3.5      
           
Return on Sales          
2011 5.5% 6.4% 3.1% 1.5% 2.5%
2012 1.1% 1.4% 0.6% (1.1)% 0.6%
2013 1.7% 1.3%      
           
Fiber Reclaimed and Brokered          
2011 211.6 213.7 773.9 1,759.6 2,958.8
2012 2,064.5 1,996.9 2,039.7 2,014.5 8,115.6
2013 1,945.0 1,802.5      

Non-GAAP Financial 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 fair value interest rate derivatives or swaps and the balance of our cash and cash equivalents. 

Our management uses net debt, along with other factors, 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. Set forth below is a reconciliation of net debt to the most directly comparable GAAP measures, Current portion of debt and Long-term debt due after one year for the current quarter and the prior quarter.

(In Millions) March 31,
2013
December 31,
2012
     
Current Portion of Debt   $ 29.7  $ 87.4
Long-Term Debt Due After One Year  3,149.3 3,163.8
Total Debt  3,179.0 3,251.2
Less: Hedge Adjustments Resulting From Fair Value Interest Rate Derivatives or Swaps  (0.1)
  3,179.0 3,251.1
Less: Cash and Cash Equivalents  (51.3) (31.0)
Net Debt   $ 3,127.7  $ 3,220.1

Segment EBITDA Margins

Our management uses "Segment EBITDA Margins", along with other factors, to evaluate our segment performance against our peers. Management believes that investors also use this measure to evaluate our performance relative to our peers.

Set forth below is a reconciliation of Segment EBITDA margins to the most directly comparable GAAP measures, Segment Income and Segment Sales for the quarter ending March 31, 2013:

(In Millions, except percentages)
 
         
  Corrugated
Packaging
Consumer
Packaging
Recycling Corporate /
Other
Consolidated
           
Segment Sales  $ 1,608.4  $ 626.5 $ 271.0  $ (181.0)  $ 2,324.9
           
Segment Income  $ 107.7  $ 63.1 $ 3.5    $ 174.3
Depreciation and Amortization   107.9   24.8  3.3  3.2  139.2
EBITDA  $ 215.6  $ 87.9 $ 6.8    
           
Segment EBITDA Margins   13.4%   14.0%  2.5%    

Credit Agreement EBITDA and Total Funded Debt

"Credit Agreement EBITDA" is calculated in accordance with the definition contained in our 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, loss on extinguishment of debt and financing fees, certain non-cash and cash charges incurred, including certain restructuring and other costs, acquisition and integration costs, charges and expenses associated with the write-up of inventory acquired and other items.

"Total Funded Debt" is calculated in accordance with the definition contained in our 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 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 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 March 31, 2013 calculation, our Leverage Ratio was 2.65 times. Our maximum permitted Leverage Ratio under the Credit Facility at March 31, 2013 was 3.75 times.

Set forth below is a reconciliation of Credit Agreement EBITDA for the twelve months ended March 31, 2013, to the most directly comparable GAAP measure, Consolidated Net Income: 

(In Millions) Twelve Months
Ended
March 31, 2013
   
Consolidated Net Income  $ 555.2
Interest Expense, net  100.4
Income Taxes  (93.0)
Depreciation and Amortization  546.3
Additional Permitted Charges   115.1
Credit Agreement EBITDA  $ 1,224.0

Set forth below is a reconciliation of Total Funded Debt to the most directly comparable GAAP measures, Current portion of debt and Long-term debt due after one year:

 (In Millions, except ratio) March 31, 
2013
   
Current Portion of Debt  $ 29.7
Long-Term Debt Due After One Year   3,149.3
Total Debt   3,179.0
Less: Hedge Adjustments Resulting From Terminated Fair Value Interest Rate Derivatives or Swaps   ―
Total Debt Less Hedge Adjustments   3,179.0
Plus: Letters of Credit, Guarantees and Other Adjustments   64.7
Total Funded Debt  $  3,243.7
   
Credit Agreement EBITDA for the Twelve Months Ended March 31, 2013  $ 1,224.0
   
Leverage Ratio    2.65

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 our 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 attributable to Rock-Tenn Company shareholders and Earnings per Diluted Share, respectively. Set forth at the beginning of this press release is a reconciliation of adjusted earnings per diluted share to Earnings per diluted share. Set forth below is a reconciliation of adjusted net income to Net income attributable to Rock-Tenn Company shareholders:

         
(In Millions) Three Months
Ended
March 31,
2013
Three Months
Ended
March 31,
2012
Six Months
Ended
March 31,
2013
Six Months
Ended
March 31,
2012
         
Net income attributable to Rock-Tenn Company shareholders  $ 324.7  $ 31.9  $ 410.7  $ 108.6
         
Alternative fuel mixture credit tax reserve adjustment  (252.9)  —  (252.9)  —
Restructuring and other costs and operating losses and transition costs due to plant closures 9.8 25.4 21.9 33.7
Loss on extinguishment of debt  0.1  12.3  0.2  12.3
Acquisition inventory step-up  —  —  —  0.3
         
Adjusted net income  $ 81.7  $ 69.6  $ 179.9  $ 154.9
CONTACT: RockTenn
John Stakel, SVP-Treasurer, 678-291-7900

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