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Press release from GlobeNewswire (a Nasdaq OMX company)

RockTenn Reports Third Quarter Fiscal 2013 Earnings Up 136% Over the Prior Year Quarter

Tuesday, July 23, 2013

RockTenn Reports Third Quarter Fiscal 2013 Earnings Up 136% Over the Prior Year Quarter

14:05 EDT Tuesday, July 23, 2013

NORCROSS, Ga., July 23, 2013 (GLOBE NEWSWIRE) -- RockTenn (NYSE:RKT) today reported earnings for the quarter ended June 30, 2013 of $1.91 per diluted share and adjusted earnings of $2.16 per diluted share. Adjusted earnings per share increased 127% over the prior year quarter.

         
  Three Months Three Months Nine Months Nine Months
  Ended  Ended Ended  Ended
  June 30, June 30, June 30, June 30,
  2013 2012 2013 2012
         
Earnings per diluted share $1.91 $0.81 $7.55 $2.31
         
Alternative fuel mixture credit tax reserve adjustment (3.47)
Restructuring and other costs and operating losses and transition costs due to plant closures 0.25 0.14 0.55 0.61
Loss on extinguishment of debt 0.17
         
Adjusted earnings per diluted share $2.16 $0.95 $4.63 $3.09

Third Quarter Results

  • Net sales of $2,448 million for the third quarter of fiscal 2013 increased $145 million compared to the third quarter of fiscal 2012. Segment income of $274 million increased $115 million or 72% over the prior year quarter.
  • RockTenn's restructuring and other costs and operating losses and transition costs due to plant closures for the third quarter of fiscal 2013 were $0.25 per diluted share after-tax. These costs primarily consisted of $22 million of pre-tax facility closure charges and $2 million of pre-tax acquisition and integration costs. The pre-tax facility closure charges primarily consisted of corrugated converting facilities acquired in the Smurfit-Stone Acquisition.

Chairman and Chief Executive Officer's Statement

RockTenn Chairman and Chief Executive Officer James A. Rubright stated, "Our quarterly adjusted earnings of $2.16 per share, up 93% over the preceding quarter and 127% over the prior year quarter, reflect the continued substantial improvements we are making in operating our businesses, executing capital projects and executing our sales and pricing strategy. As these broadly based initiatives continue to strengthen and as we further implement the current pricing initiatives in corrugated packaging and consumer paperboard grades, our earnings for the fourth quarter and the next fiscal year should also be sharply higher than our earnings for the comparable prior year periods."

Segment Results

Containerboard and Paperboard Tons Shipped  

Corrugated Packaging segment tons shipped increased approximately 102,000 tons over the prior year quarter due to increased production from operating improvements and reduced maintenance outage tons.  Consumer Packaging segment paperboard and pulp shipments of approximately 363,000 tons increased approximately 15,000 tons over the prior year quarter.

Corrugated Packaging Segment

Corrugated Packaging segment net sales increased $174 million to $1,720 million and segment income increased $123 million to $196 million in the third quarter of fiscal 2013 compared to the prior year quarter. The increased sales and earnings are primarily related to higher selling prices and volumes and increased synergies that were partially offset by higher commodity and other costs. In addition, as a result of the previously disclosed restructuring and extension of a steam supply contract for its Jacksonville recycled containerboard mill, RockTenn recorded a $0.10 per share non-cash gain in the quarter by reducing amortization expense. Corrugated Packaging segment EBITDA margin was 17.3% for the third quarter of fiscal 2013.

Consumer Packaging Segment

Consumer Packaging segment net sales increased $16 million and segment income declined $8 million in the third quarter of fiscal 2013 compared to the prior year quarter primarily as generally lower selling prices and higher virgin fiber and energy costs more than offset higher volumes and lower recycled fiber costs. Consumer Packaging segment EBITDA margin was 15.7% for the third quarter of fiscal 2013.

Recycling Segment

Recycling segment net sales decreased $64 million over the prior year third quarter to $275 million primarily as a result of lower volume and pricing. Segment income was relatively flat at $2 million in the third quarter of fiscal 2013 compared to the prior year quarter. Recycling segment EBITDA margin was 1.9% for the third quarter of fiscal 2013.

Cash Provided From Operating, Financing and Investing Activities

Cash provided by operations was $270 million in the third quarter of fiscal 2013, after pension funding in excess of expense of $45 million. We reduced net debt (as defined) by $144 million in the June quarter to $2.98 billion and our Leverage Ratio (as defined) was 2.29 times.  Total debt was $3.03 billion at June 30, 2013. We invested $113 million in capital expenditures and returned $22 million in dividends to our shareholders. 

Conference Call

We will host a conference call to discuss our results of operations for the third quarter of fiscal 2013 and other topics that may be raised during the discussion at 9:00 a.m., Eastern Time, on July 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 August 7, 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.

Cautionary Statements

Statements in this release that do not relate strictly to historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on our current expectations, beliefs, plans or forecasts and use words such as will, estimate, anticipate, project, intend, or expect, or refer to future time periods, and include statements made in this report regarding, among other things our belief that the continued substantial improvements we are making in operating our businesses, executing capital projects and executing our sales and pricing strategy, as well as that these broadly based initiatives continue to strengthen and as we further implement the current pricing initiatives in corrugated packaging and consumer paperboard grades, our earnings for the fourth quarter and the next fiscal year should also be sharply higher than our earnings for the comparable prior year periods constitute forward-looking statements within the meaning of the federal securities laws. These statements are subject to certain risks and uncertainties including with respect to our expectations regarding economic, competitive and market conditions generally; expected volumes and price levels of purchases by customers; 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. These expectations are based on assumptions that management believes are reasonable; however, undue reliance should not be placed on these forward-looking statements because these risks and uncertainties could cause actual results to differ materially from those contained in any forward-looking statements. There are many other factors and uncertainties that impact these forward-looking statements that we cannot predict accurately, including our ability to integrate Smurfit-Stone or to achieve benefits from the Smurfit-Stone acquisition, including synergies, performance improvements and successful implementation of capital projects. 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; changes in environmental and other governmental regulation; 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, 2012. 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.

ROCK-TENN COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
         
         
  FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
  June 30, June 30, June 30, June 30,
  2013 2012 2013 2012
         
         
NET SALES  $ 2,448.3  $ 2,303.2  $ 7,060.3  $ 6,853.8
         
Cost of Goods Sold   1,951.6  1,943.4  5,768.9  5,741.0
         
         
Gross Profit  496.7  359.8  1,291.4  1,112.8
Selling, General and Administrative Expenses   243.9  229.6  704.3  685.1
Restructuring and Other Costs, net  23.5  13.7  52.0  52.1
         
         
Operating Profit  229.3  116.5  535.1  375.6
Interest Expense  (25.6)  (26.8)  (81.9)  (91.7)
Loss on Extinguishment of Debt   --   (0.1)  (0.3)  (19.6)
Interest Income and Other Income (Expense), net  (1.8)  0.2  (1.9)  1.1
Equity in Income of Unconsolidated Entities  1.2  0.8  2.9  2.9
         
         
INCOME BEFORE INCOME TAXES  203.1  90.6  453.9  268.3
         
Income Tax (Expense) Benefit  (61.4)  (31.3)  100.3  (99.5)
         
         
CONSOLIDATED NET INCOME  141.7  59.3  554.2  168.8
         
         
Less: Net Income Attributable to Noncontrolling Interests  (1.6)  (1.1)  (3.4)  (2.0)
         
         
NET INCOME ATTRIBUTABLE TO ROCK-TENN COMPANY SHAREHOLDERS  $ 140.1  $ 58.2  $ 550.8  $ 166.8
         
         
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  $ 140.1  $ 58.2  $ 550.8  $ 166.8
Less: Distributed and undistributed income available to participating securities  --   --   (0.1)  (0.6)
Distributed and undistributed income available to Rock-Tenn Company shareholders  $ 140.1  $ 58.2  $ 550.7  $ 166.2
         
Diluted weighted average shares outstanding  73.2  72.3  73.0  71.9
         
Diluted earnings per share  $ 1.91  $ 0.81  $ 7.55  $ 2.31
         
 
ROCK-TENN COMPANY
SEGMENT INFORMATION
(UNAUDITED)
(IN MILLIONS)
         
         
  FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
  June 30, June 30, June 30, June 30,
  2013 2012 2013 2012
         
         
NET SALES:        
         
Corrugated Packaging  $ 1,719.5  $ 1,545.2  $ 4,917.8  $ 4,573.9
Consumer Packaging  644.8  628.9  1,882.6  1,896.9
Recycling  274.6  338.9  797.4  964.4
Intersegment Eliminations  (190.6)  (209.8)  (537.5)  (581.4)
         
         
TOTAL NET SALES  $ 2,448.3  $ 2,303.2  $ 7,060.3  $ 6,853.8
         
         
SEGMENT INCOME:        
         
Corrugated Packaging (1)  $ 196.4  $ 73.4  $ 441.9  $ 251.4
Consumer Packaging   76.0  83.7  205.6  248.4
Recycling  2.0  2.2  9.8  9.9
         
         
TOTAL SEGMENT INCOME  $ 274.4  $ 159.3  $ 657.3  $ 509.7
         
         
Restructuring and Other Costs, net  (23.5)  (13.7)  (52.0)  (52.1)
Non-Allocated Expenses  (20.4)  (28.3)  (67.3)  (79.1)
Interest Expense  (25.6)  (26.8)  (81.9)  (91.7)
Loss on Extinguishment of Debt   --   (0.1)  (0.3)  (19.6)
Interest Income and Other Income (Expense), net  (1.8)  0.2  (1.9)  1.1
         
         
INCOME BEFORE INCOME TAXES  $ 203.1  $ 90.6  $ 453.9  $ 268.3
         
         
(1) After $6.7 million of pre-tax losses at our Matane, Quebec containerboard mill in the nine months ended 
 June 30, 2012 and after inventory step-up expense of $0.2 and $0.6 million pre-tax in the three and   
 nine months ended June 30, 2012, respectively.        
         
ROCK-TENN COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN MILLIONS)
         
   FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
  June 30, June 30, June 30, June 30,
  2013 2012 2013 2012
CASH FLOWS FROM OPERATING ACTIVITIES:        
Consolidated net income  $ 141.7  $ 59.3  $ 554.2  $ 168.8
         
Adjustments to reconcile consolidated net income to net cash provided by operating activities:    
Depreciation and amortization  132.4  131.4  409.7  396.7
Deferred income tax (benefit) expense  53.4  29.9  (115.3)  90.7
Loss on extinguishment of debt   --   0.1  0.3  19.6
Share-based compensation expense  13.0  9.3  35.7  21.1
Loss (gain) on disposal of plant and equipment and other, net  0.9  (6.9)  (4.6)  (12.9)
Equity in income of unconsolidated entities  (1.2)  (0.8)  (2.9)  (2.9)
Settlement of interest rate swaps  --   --   --   (2.8)
Pension funding more than expense  (45.0)  (54.1)  (87.5)  (162.3)
Impairment adjustments and other non-cash items  9.1  3.6  15.2  19.1
 Changes in operating assets and liabilities, net of acquisitions:        
 Accounts receivable  (46.4)  (9.9)  (41.3)  63.8
 Inventories  (17.2)  65.0  (64.2)  8.5
 Other assets  --   (11.7)  (34.7)  (44.4)
 Accounts payable  (1.0)  (9.4)  34.0  (35.7)
 Income taxes  4.9  (4.9)  (8.8)  10.6
 Accrued liabilities and other  25.4  2.7  32.8  3.5
NET CASH PROVIDED BY OPERATING ACTIVITIES  270.0  203.6  722.6  541.4
INVESTING ACTIVITIES:        
         
Capital expenditures  (113.1)  (146.1)  (307.1)  (348.3)
Cash paid for purchase of businesses, net of cash acquired  (6.2)  (33.0)  (6.2)  (120.5)
Investment in unconsolidated entities  --   --   --   (1.7)
Return of capital from unconsolidated entities  0.2  0.5  0.8  1.6
Proceeds from sale of property, plant and equipment   4.6  4.5  11.9  37.1
Proceeds from property, plant and equipment insurance settlement  2.0  10.2  7.7  10.2
NET CASH USED FOR INVESTING ACTIVITIES   (112.5)  (163.9)  (292.9)  (421.6)
FINANCING ACTIVITIES:        
         
Proceeds from issuance of notes  --   --   --   748.9
Additions to revolving credit facilities  40.4  99.9  94.9  310.6
Repayments of revolving credit facilities  (20.4)  (63.4)  (72.2)  (144.3)
Additions to debt  31.0  30.8  226.2  313.8
Repayments of debt  (196.6)  (110.6)  (620.4)  (1,319.3)
Debt issuance costs  (0.2)  (0.8)  (1.8)  (6.5)
Cash paid for debt extinguishment costs  --   --   (0.1)  (13.9)
Issuances of common stock, net of related minimum tax withholdings  1.6  2.1  1.0  0.4
Excess tax benefits from share-based compensation  0.6  2.9  4.8  10.8
Advances from (repayments to) unconsolidated entity  0.6  (0.7)  0.9  (0.3)
Cash dividends paid to shareholders  (21.6)  (14.2)  (53.7)  (42.4)
Cash distributions to noncontrolling interests  (1.6)  (0.4)  (3.9)  (0.4)
NET CASH USED FOR FINANCING ACTIVITIES  (166.2)  (54.4)  (424.3)  (142.6)
Effect of exchange rate changes on cash and cash equivalents  (0.3)  (0.7)  (0.3)  0.6
         
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS  (9.0)  (15.4)  5.1  (22.2)
         
Cash and cash equivalents at beginning of period  51.3  34.9  37.2  41.7
Cash and cash equivalents at end of period  $ 42.3  $ 19.5  $ 42.3  $ 19.5
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:      
Cash paid (received) during the period for:        
Income taxes, net of refunds  $ 3.1  $ 3.6  $ 15.3  $ (13.0)
Interest, net of amounts capitalized  8.4  15.5  60.4  75.6
         
 ROCK-TENN COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN MILLIONS)
     
  June 30, September 30,
  2013 2012
     
ASSETS    
CURRENT ASSETS:    
Cash and cash equivalents  $ 42.3  $ 37.2
Restricted cash  9.3  40.6
Accounts receivable (net of allowances of $29.6 and $26.9)  1,111.0  1,075.6
Inventories  879.0  861.9
Other current assets  291.9  174.5
TOTAL CURRENT ASSETS  2,333.5  2,189.8
     
Property, plant and equipment at cost:    
Land and buildings  1,200.4  1,207.7
Machinery and equipment  6,383.5  6,121.7
Transportation equipment  14.7  13.6
Leasehold improvements  24.9  20.0
   7,623.5  7,363.0
Less accumulated depreciation and amortization  (2,065.0)  (1,751.6)
Net property, plant and equipment  5,558.5  5,611.4
Goodwill  1,860.3  1,865.3
Intangibles, net  730.2  795.1
Other assets  228.1  225.5
TOTAL ASSETS  $ 10,710.6  $ 10,687.1
     
LIABILITIES AND EQUITY    
CURRENT LIABILITES:    
Current portion of debt  $ 54.1  $ 261.3
Accounts payable  758.1  708.9
Accrued compensation and benefits  212.8  211.4
Other current liabilities  207.7  226.7
TOTAL CURRENT LIABILITIES  1,232.7  1,408.3
     
Long-term debt due after one year  2,972.3  3,151.2
Pension liabilities  1,367.4  1,493.1
Postretirement medical liabilities  144.2  154.2
Deferred income taxes  871.6  888.8
Other long-term liabilities  165.0  173.9
Redeemable noncontrolling interests  11.5  11.4
     
Total Rock-Tenn Company shareholders' equity  3,945.6  3,405.7
Noncontrolling interests  0.3  0.5
Total Equity  3,945.9  3,406.2
TOTAL LIABILITIES AND EQUITY  $ 10,710.6  $ 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  324.7  140.1    
           
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  1.91    
           
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  132.4    
           
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  113.1    
           
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% 98.2%    
           
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    1,719.5        
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    26.7        
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    196.4        
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%   11.4%        
                   
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   1,830.1        
                   
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    32.6        
                   
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    68.1        
                   
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    19.7        
                   
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    308.7        
                   
                   
(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  644.8    
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  6.4    
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  76.0    
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% 11.8%    
           
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 231.5 241.1 247.3    
           
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 87.6    
           
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 28.1    
           
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  5.3    
           
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  82.3    
           
           
(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  274.6    
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  157.5    
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  2.0    
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% 0.7%    
           
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 1,819.2    

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) June 30, March 31,
  2013 2013
     
Current Portion of Debt  $54.1 $29.7
Long-Term Debt Due After One Year  2,972.3 3,149.3
Total Debt  3,026.4 3,179.0
Less: Hedge Adjustments Resulting From Fair Value Interest Rate Derivatives or Swaps 
  3,026.4 3,179.0
Less: Cash and Cash Equivalents  (42.3) (51.3)
Net Debt  $ 2.984.1 $3,127.7

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 June 30, 2013:

(In Millions, except percentages)          
           
  Corrugated  Consumer    Corporate   
  Packaging Packaging Recycling  / Other Consolidated
Segment Sales  $1,719.5 $644.8 $274.6 $(190.6) $2,448.3
           
Segment Income  $196.4 $76.0 $2.0   $274.4
Depreciation and Amortization  101.0 25.0 3.2 3.2 132.4
EBITDA  $297.4 $101.0 $5.2    
           
Segment EBITDA Margins  17.3% 15.7% 1.9%    
           

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 June 30, 2013 calculation, our Leverage Ratio was 2.29 times. Our maximum permitted Leverage Ratio under the Credit Facility at June 30, 2013 was 3.50 times.

Set forth below is a reconciliation of Credit Agreement EBITDA for the twelve months ended June 30, 2013, to the most directly comparable GAAP measure, Consolidated Net Income: 

(In Millions) Twelve Months
  Ended
  June 30, 2013
   
Consolidated Net Income  $637.6
Interest Expense, net  99.2
Income Taxes  (62.9)
Depreciation and Amortization  547.3
Additional Permitted Charges  125.8
Credit Agreement EBITDA  $1,347.0

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) June 30,
  2013
   
Current Portion of Debt  $54.1
Long-Term Debt Due After One Year  2,972.3
Total Debt  3,026.4
Less: Hedge Adjustments Resulting From Terminated Fair Value Interest Rate Derivatives or Swaps 
Total Debt Less Hedge Adjustments  3,026.4
Plus: Letters of Credit, Guarantees and Other Adjustments  59.7
Total Funded Debt  $3,086.1
   
Credit Agreement EBITDA for the Twelve Months Ended June 30, 2013 $1,347.0
   
Leverage Ratio  2.29

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:

         
  Three Months Three Months Nine Months Nine Months
  Ended  Ended Ended  Ended
  June 30, June 30, June 30, June 30,
(In Millions) 2013 2012 2013 2012
         
Net income attributable to Rock-Tenn Company shareholders $140.1 $58.2 $550.8 $166.8
         
Alternative fuel mixture credit tax reserve adjustment (252.9)
Restructuring and other costs and operating losses and transition costs due to plant closures 18.0 10.0 39.9 43.7
Loss on extinguishment of debt 0.2 12.3
Acquisition inventory step-up 0.2 0.4
         
Adjusted net income $158.1 $68.4 $338.0 $223.2
         
CONTACT: RockTenn
John Stakel, SVP-Treasurer, 678-291-7901

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