RockTenn Q3 2011 results compared to the previous year

RockTenn have reported a net loss of $46m due to Smurfit-Stone acquisition related charges, which amounts to  $0.60 per diluted share. Adjusted earnings were $1.29 per diluted share, up 13% compared to the previous year quarter adjusted earnings of $1.14 per diluted share.

Q3 results…

 

  • Net sales of $1,382.1m up 79.1% from last year’s Q3 results (mainly due to the Smurfitt-Stone acquisition)

 

  • Segment income adjusted to allow for $55.4m of pre-tax acquisition inventory

 

  • GAAP states that an acquirer value inventory acquired at fair value. This reduces the profit on sales to that portion attributable to the selling effort. This step-up in value reduced their income for the month of June 2011 by $55.4m pre-tax, or $0.69 per diluted share after-tax, as most of the acquired inventory was sold and an intercompany profit reserve was established on new inventory and charged to cost of goods sold.

 

  • RockTenn's pre-tax restructuring and other costs, net of related non-controlling interest, were $55.4 million, or $0.71 per diluted share after-tax, for Q3 of fiscal 2011 consisting of $29.5m of pre-tax integration costs that primarily consisted of severance and other employee costs and professional services, $13.7m of pre-tax facility closure charges primarily related to four former Smurfit-Stone corrugated container plants and one folding carton plant and $12.2m of pre-tax acquisition costs.

 

  • They showed a pre-tax loss on extinguishment of debt of $39.5m, or $0.49 per diluted share for associated fees and expenses incurred in connection with the $4.3b of acquisition debt financing and the repayment and termination of pre-acquisition financing arrangements. The extinguishment represented approximately half of the fees and expenses paid in connection with the new facilities. The remainder will be amortized to interest expense over the life of the debt instruments.

 

Chairman and Chief Executive Officer's Statement

RockTenn Chairman and Chief Executive Officer James A. Rubright stated, "Our 13% adjusted earnings increase over the prior year quarter and 24% increase over the immediately preceding quarter resulted from the earnings accretion from the 34 days of operating results in the quarter following the acquisition of Smurfit-Stone on May 27, 2011. We expected this acquisition to be highly accretive to earnings, and it has been and should continue to be so. We are ahead of our expectations on capturing synergies from the acquisition and estimate that by quarter end we had achieved a run rate of synergy capture of between $75 million and $80 million."

 

In Q3 of fiscal 2011, following the Smurfit-Stone acquisition, they announced a realignment of operating responsibilities. Their business segments include the following…

 

Corrugated Packaging

Containerboard mills and corrugated converting operations

 

Consumer Packaging

Folding carton operations, coated and uncoated paperboard mills, merchandising displays operations and interior partition operations

 

Recycling and Waste Solutions

Recycled fibre procurement and trading activities.

 

Their results have been reclassified for all periods to reflect this realignment.

 

Containerboard and Paperboard Tons Produced

Total tons produced in the Q3 of fiscal 2011 increased by approximately 643k tons over the previous year quarter due to the Smurfit-Stone acquisition. The increase included an increase in recycled paperboard tons, which was partially offset by lower tons at their bleached paperboard mill in Demopolis, Alabama due to a scheduled major maintenance outage.

 

Cash Provided By Operating Activities

Net cash provided by operating activities in Q3 of fiscal 2011 was $145.7m compared to $100.3m in Q3 of the previous year.

 

Financing and Investing Activities

Their net debt at Q3 end was $3,431.1m and their Leverage Ratio was 2.53 times at June 30, 2011, well below their maximum credit agreement covenant of 3.75 times.

 

Segment                                                         Change from Q3 2010 to Q3 2011

Recycling and Waste Solutions                                              +$106.7m

Consumer Packaging                                                             +$36.1m

Corrugated Packaging                                                            +$524m

Posted Date: 02nd Aug 2011