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RKT > SEC Filings for RKT > Form 10-Q on 3-May-2013All Recent SEC Filings

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Form 10-Q for ROCK-TENN CO


3-May-2013

Quarterly Report


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included herein and our audited Consolidated Financial Statements and Notes thereto for the fiscal year ended September 30, 2012, as well as the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," that are part of our Fiscal 2012 Form 10-K. The table in "Note 14. Segment Information" of the Notes to Condensed Consolidated Financial Statements included herein shows certain operating data for our segments.

Overview

Net sales of $2,324.9 million for the second quarter of fiscal 2013 increased $42.0 million, or 1.8% over the second quarter of fiscal 2012, primarily as a result of increased containerboard and corrugated boxes and sheet selling prices and containerboard volume that was partially offset by generally lower prices in our Consumer Packaging and Recycling segments, lower display sales and lower volumes due to the planned major maintenance outage at our Demopolis, AL bleached paperboard mill. Total segment income increased $17.0 million or 10.8% to $174.3 million in the second quarter of fiscal 2013 compared to the prior year quarter primarily as a result of increased net sales, decreased recycled fiber costs and a $5.7 million insurance settlement gain related to a fiscal 2012 turbine failure at our Demopolis, AL bleached paperboard mill, partially offset by higher operating expenses including a $12.1 million increase in amortization of major maintenance outage expense in our containerboard mills, increased virgin fiber, chemical and freight costs and increased depreciation and amortization expense due to capital investments. The second quarter of fiscal 2012 included $6.7 million of pre-tax losses at our then recently closed Matane, Quebec containerboard mill.

In the second quarter of fiscal 2013, Cash Generated for Net Debt Repayment, Dividends, Acquisitions/Investments and Pension in Excess of Expense (as hereinafter defined) was $122.1 million. See our reconciliations of the non-GAAP measures adjusted earnings per diluted share, adjusted net income and cash generated for Cash Generated for Net Debt Repayment, Dividends, Acquisitions/Investments and Pension in Excess of Expense in the "Non-GAAP Financial Measures" section below.

Net income, before adjustments, among other things, for the reversal of previously established tax reserves related to alternative fuel mixture credits acquired in the Smurfit-Stone Acquisition, restructuring and loss on extinguishment of debt in the second quarter of fiscal 2013 was $324.7 million compared to $31.9 million in the second quarter of last year. Adjusted net income (as hereinafter defined) in the second quarter of fiscal 2013 increased $12.1 million over the second quarter of last year to $81.7 million.

Adjusted earnings per diluted share (as hereinafter defined in the "Non-GAAP Financial Measures" section below) are as follows:

                                               Three Months Ended              Six Months Ended
                                                    March 31,                      March 31,
                                              2013             2012           2013           2012
Earnings per diluted share                $     4.45       $     0.44     $     5.64      $    1.50

Alternative fuel mixture tax 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

In the second quarter of fiscal 2013, following the Internal Revenue Service's completion of their examination of the Smurfit-Stone 2009 tax return, we recorded a tax benefit of $3.47 per diluted share for the reversal of $254.1 million of tax reserves related to alternative fuel mixture credits acquired in the Smurfit-Stone Acquisition partially offset by a resulting increase in a state tax valuation allowance of $1.2 million. Our restructuring and other costs and operating losses and transition costs due to plant closures in the second quarter of fiscal 2013 were $0.14 per diluted share and consisted primarily of $4.5 million of pre-tax integration costs, $10.1 million of pre-tax facility closure and related operating losses and transition costs primarily related to consolidating corrugated container plants.

The second quarter of fiscal 2012, restructuring and other costs and operating losses and transition costs due to plant closures, net of related noncontrolling interest were $0.36 per diluted shared and consisted primarily of $19.3 million of pre-tax facility


Table of Contents

closure charges primarily related to the Matane mill and corrugated container plants acquired in the Smurfit-Stone Acquisition, $7.7 million of pre-tax operating losses and transition costs primarily in connection with the Matane mill closure and consolidating converting facilities and $8.7 million of pre-tax integration and acquisition costs that primarily consisted of professional services and other employee costs. We recognized a pre-tax loss on extinguishment of debt in the second quarter of fiscal 2012 of $19.5 million, or $0.17 per diluted share primarily in connection with the redemption of our 9.25% senior notes due March 2016 at a redemption price equal to 104.625% of par and to expense unamortized deferred financing and discount costs.

In the six months ended March 31, 2013, we adjusted $252.9 million in tax reserves as discussed above, our restructuring and other costs and operating losses and transition costs due to plant closures in the six months ended March 31, 2013 were $0.30 per diluted share and consisted primarily of $11.6 million of pre-tax integration costs, $21.3 million of pre-tax facility closure and related operating losses and transition costs primarily related to consolidating corrugated container plants.

Restructuring and other costs and operating losses and transition costs due to plant closures, net of related noncontrolling interest in the six months ended March 31, 2012 was $0.48 per diluted share and consisted primarily of $22.9 million of pre-tax facility closure charges primarily related to the Matane mill and corrugated container plants acquired in the Smurfit-Stone Acquisition, $9.3 million of pre-tax operating losses and transition costs primarily in connection with the Matane mill closure and consolidating converting facilities and $16.0 million of pre-tax integration and acquisition costs that primarily consisted of professional services and other employee costs. We recognized a pre-tax loss on extinguishment of debt in the second quarter of fiscal 2012 of $19.5 million, or $0.17 per diluted share as discussed above.

We discuss the restructuring charges in more detail in "Note 6. Restructuring and Other Costs, Net" of the Notes to Condensed Consolidated Financial Statements included herein.

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