Rock-Tenn Company Reports First Quarter Fiscal 2005 Results

    Business Editors

    NORCROSS, Ga.--(BUSINESS WIRE)--Jan. 27, 2005--Rock-Tenn Company (NYSE:RKT) today reported financial results for the quarter ended December 31, 2004, its first quarter of fiscal 2005. Net sales for the first quarter of fiscal 2005 were $385.8 million, up 5.4% from $366.1 million in the prior year quarter. The Company reported net income of $0.5 million, or $0.01 per diluted share, for the first quarter of fiscal 2005. Income from continuing operations in the first quarter of fiscal 2004 was $4.2 million, or $0.12 per diluted share. Net income for the first quarter of fiscal 2004 also included income from discontinued operations of $7.7 million, or $0.22 per diluted share.
    Net income for the first quarter of fiscal 2005 included pre-tax restructuring and other costs of $0.5 million related to previously announced facility closures. Foreign currency transactions reduced pre-tax income by $0.4 million due to the change in the value of the US Dollar relative to the Canadian dollar. The Company recorded $0.8 million additional tax expense in excess of its normal provision primarily due to an adjustment related to the acquisition of the Athens, Alabama, corrugated facility acquired in August 2004.

    Segment Results

    Packaging Products Segment

    Packaging Products segment sales increased 6.2% to $221.8 million in the first quarter of fiscal 2005 from $208.9 million in the first quarter of fiscal 2004. Packaging Products segment operating income was $5.3 million in the first quarter of fiscal 2005 compared to $7.0 million in the prior year quarter.
    Folding carton division sales increased 6.5% from the year ago quarter primarily due to an increase in volume related to increased sales to existing customers. Interior packaging division sales increased 4.5% over the prior year quarter due to a combination of higher prices and increased volume. Operating income during the first quarter of fiscal 2005 was reduced by $1.3 million of pre-tax operating losses, which are not properly classifiable as plant closing costs, incurred in winding down operations of the St. Paul, Minnesota, folding carton facility. This facility is now closed.

    Merchandising Displays and Corrugated Packaging Segment

    Merchandising Displays and Corrugated Packaging segment sales were $79.5 million in the first quarter of fiscal 2005 compared to $73.5 million in the first quarter of fiscal 2004. Corrugated packaging sales increased 50.1% compared to the prior year quarter primarily due to a combination of sales of the Athens corrugator and higher selling prices. Operating income for the segment was $2.7 million in the first quarter of fiscal 2005 compared to $5.9 million in the prior year quarter. The decline in operating income was primarily the result of weaker than expected sales in the merchandising displays division and a change in its customer and product mix.

    Paperboard Segment

    Paperboard segment sales increased to $128.7 million in the first quarter of fiscal 2005 compared to $128.3 million in the first quarter of fiscal 2004. Operating income in the segment increased 39.1% to $4.4 million in the first quarter of fiscal 2005 compared to $3.1 million in the prior year quarter. During the first quarter of fiscal 2005 there was a $45 per ton increase in average paperboard selling price compared to the prior year quarter. Fiber, energy, chemical and freight costs increased by a total of $35 per ton compared to the prior year quarter. Paperboard tons shipped in the first quarter of fiscal 2005 were 253,257 tons compared to 274,590 tons in the year ago quarter. The Company's mills operated at 92% of capacity during the quarter.

    Chairman and Chief Executive Officer's Statement

    Rock-Tenn Company Chairman and Chief Executive Officer James A. Rubright stated, "We are pleased with the results of our paperboard mills in a seasonally weak quarter, as the price increases we announced last year are allowing us to begin recovering the increased material, freight and energy costs we have absorbed. Offsetting the improved results of our Paperboard segment were lower results from our Packaging Products and Merchandising Displays and Corrugated Packaging segments."
    "Our Packaging Products segment's sales continued to grow year over year, reflecting the strong competitive position we have built through investments in technology, although costs related to the closure of our St. Paul facility reduced operating income for the segment. In our Merchandising Displays and Corrugated Packaging segment, better results in our corrugated packaging business were more than offset by lower sales and earnings in our merchandising displays business. Display demand has been strong in January and we expect improved quarter over quarter results in this segment."

    Selling, General & Administrative Expenses

    Selling, general and administrative (SG&A) expenses were 12.0% of net sales in the first quarter of fiscal 2005, compared to 13.1% of net sales in the prior year quarter.

    Financing

    Rock-Tenn Company's current maturities of debt and long-term debt due after one year combined was $459.6 million, at the end of the first quarter of fiscal 2005. The Company's cash and cash equivalents at quarter end were $63.2 million.
    During the quarter Rock-Tenn Company purchased $6.0 million of its 2005 Notes at an average price of 103.1% of par value, or $0.18 million over par value, excluding the favorable impact of unamortized realized interest rate swap gains. The average price including the favorable impact of unamortized realized interest rate swap gains was 101.6% of par value, or $0.1 million over par value.
    Rock-Tenn Company extended the term of its revolving credit facility to June 30, 2006. The amendment made no other material changes to the facility.

    Cash Provided By Operating Activities

    Net cash provided by operating activities in the first quarter of fiscal 2005 was $22.4 million compared to $13.7 million in the first quarter of fiscal 2004, which included $0.5 million of cash provided by operating activities from discontinued operations.

    Conference Call

    The Company will host a conference call to discuss its results of operations for the first quarter of fiscal 2005 and other topics that may be raised during the discussion at 11:00 a.m., Eastern Time, on Thursday, January 27, 2005. The conference call will be webcast and can be accessed, along with a copy of this press release and any other statistical information related to the conference call, at www.rocktenn.com.

    About Rock-Tenn Company

    Rock-Tenn Company provides marketing and packaging solutions to consumer products companies at low costs, with annual net sales of $1.6 billion and over 80 operating locations in the United States, Canada, Mexico and Chile.

    Cautionary Statements

    Statements herein regarding expected sales and earnings constitute forward-looking statements within the meaning of the federal securities laws and are subject to certain risks and uncertainties. With respect to these statements, the Company has made assumptions regarding, among other things, expected economic, competitive and market conditions generally; expected volumes and price levels of purchases by customers; 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 such 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 the Company's 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 customers; and adverse changes in general market and industry conditions. Such risks and other factors that may impact our assumptions are more particularly described in the Company's filings with the Securities and Exchange Commission, including under the caption "Business -- Forward-Looking Information and Risk Factors" in the Company's Annual Report on Form 10-K for the most recently ended fiscal year. The information contained herein speaks as of the date hereof and the Company does not have or undertake any obligation to update such information as future events unfold.

ROCK-TENN COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

FOR THE THREE MONTHS ENDED December 31, December 31, 2004 2003

---------------------------------------------------------------------- NET SALES $ 385,817 $ 366,110

Cost of Goods Sold 329,993 304,259

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Gross Profit 55,824 61,851 Selling, General and Administrative Expenses 46,458 48,101 Restructuring and Other Costs 476 105

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Operating Profit 8,890 13,645 Interest Expense (6,448) (5,904) Interest and Other Income 176 73 Income (Loss) from Unconsolidated Joint Venture 143 (50) Minority Interest in Income of Consolidated Subsidiary (865) (886)

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INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 1,896 6,878

Provision for Income Taxes 1,414 2,712

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INCOME FROM CONTINUING OPERATIONS 482 4,166

Income from Discontinued Operations, Net of Taxes --- 7,713

NET INCOME $ 482 $ 11,879 ----------------------------------------------------------------------

Weighted Average Common Shares Outstanding-Diluted 35,881 35,281

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Diluted Earnings Per Share: Income from Continuing Operations $ 0.01 $ 0.12 Income from Discontinued Operations 0.00 0.22 ---- ---- Diluted Earnings Per Share $ 0.01 $ 0.34

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ROCK-TENN COMPANY INDUSTRY SEGMENT INFORMATION (UNAUDITED) (IN THOUSANDS, EXCEPT TONNAGE DATA)

---------------------------------------------------------------------- FOR THE THREE MONTHS ENDED December 31, December 31, 2004 2003

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NET SALES:

Packaging Products Segment $ 221,764 $ 208,875 Merchandising Displays and Corrugated Packaging Segment 79,510 73,518 Paperboard Segment 128,703 128,262 Intersegment Eliminations (44,160) (44,545)

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TOTAL $ 385,817 $ 366,110

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INCOME FROM CONTINUING OPERATIONS BEFORE TAXES:

Packaging Products Segment $ 5,274 $ 7,037 Merchandising Displays and Corrugated Packaging Segment 2,688 5,932 Paperboard Segment 4,354 3,130

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Segment Income $ 12,316 $ 16,099

Restructuring and Other Costs (476) (105) Non-Allocated Expense (2,807) (2,399) Interest Expense (6,448) (5,904) Interest and Other Income 176 73 Minority Interest in Income of Consolidated Subsidiary (865) (886)

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INCOME FROM CONTINUING OPERATIONS BEFORE TAXES $ 1,896 $ 6,878

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Paperboard Shipped (in tons) 253,257 274,590

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ROCK-TENN COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)

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FOR THE THREE MONTHS ENDED December 31, December 31, 2004 2003

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CASH FLOWS FROM OPERATING ACTIVITIES: Net income from continuing operations $ 482 $ 4,166

Items in income not affecting cash: Depreciation and amortization 18,451 18,602 Deferred income taxes 1,177 (3,354) Deferred compensation expense 400 281 Income tax benefit of employee stock options 125 188 (Gain) loss on disposal of property, plant and equipment and other, net 65 (448) Loss on currency translation 383 34 (Income) loss from unconsolidated joint venture (143) 50 Minority interest in income of consolidated subsidiary 865 886 Impairment loss and other non-cash items (857) --- Pension funding less than expense 3,349 4,416 Net changes in operating assets and liabilities (1,908) (11,655)

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CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS 22,389 13,166 Cash provided by operating activities from discontinued operations --- 531 ------ ------ NET CASH PROVIDED BY OPERATING ACTIVITIES 22,389 13,697

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INVESTING ACTIVITIES:

Capital expenditures (10,174) (15,421) Cash paid for purchase of businesses, net of cash received (75) (1,060) Cash contributed to joint venture --- (100) Proceeds from sale of property, plant and equipment 2,043 693

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CASH USED FOR INVESTING ACTIVITIES FROM CONTINUING OPERATIONS (8,206) (15,888) Cash provided by investing activities from discontinued operations --- 61,943 ------- ------ NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES (8,206) 46,055

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FINANCING ACTIVITIES:

Net repayments to revolving credit facilities --- (3,500) Repayments of debt (6,104) (9,107) Debt issuance costs (64) --- Issuance of common stock 1,824 1,411 Cash dividends paid to shareholders (3,222) (2,978) Distribution to minority interest (525) ---

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CASH USED FOR FINANCING ACTIVITIES (8,091) (14,174)

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Effect of exchange rate changes on cash 205 207

INCREASE IN CASH AND CASH EQUIVALENTS 6,297 45,785

Cash and cash equivalents: Beginning of period 56,891 14,173

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End of period $ 63,188 $ 59,958

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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Income taxes, net of refunds $ 2,001 $ 2,341 Interest, net of amounts capitalized 313 320

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ROCK-TENN COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (IN THOUSANDS)

---------------------------------------------------------------------- DECEMBER 31, SEPTEMBER 30, DECEMBER 31, 2004 2004 2003

----------------------------------------------------------------------

ASSETS:

Cash and cash equivalents $ 63,188 $ 56,891 $ 59,958

Receivables - net 154,970 177,378 153,991

Inventories - at LIFO cost 134,057 127,359 120,560

Other current assets 25,399 22,286 17,221

Current assets held for sale 804 1,526 ---

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TOTAL CURRENT ASSETS 378,418 385,440 351,730

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Land, building and equipment - net 549,868 552,803 580,575

Intangible and other assets 345,808 345,570 346,443

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TOTAL ASSETS $1,274,094 $1,283,813 $1,278,748

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LIABILITIES AND SHAREHOLDERS' EQUITY:

Current maturities of debt $ 78,116 $ 83,906 $ 429 Current realized interest rate swap gains 1,401 2,148 --- Current mark-to-market value of interest rate swaps (417) (294) --- ------ ------ --- Total current maturities of debt 79,100 85,760 429

Other current liabilities 171,913 183,756 157,979

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TOTAL CURRENT LIABILITIES 251,013 269,516 158,408

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Long-term debt due after one year 381,496 381,694 489,022 Realized interest rate swap gains 18,514 19,087 21,032 Mark-to-market value of interest rate swaps (3,509) (2,480) (2,958) ------- ------- ------- Total long-term debt 396,501 398,301 507,096

Deferred income taxes 86,529 84,947 90,447

Other long-term items 94,473 93,448 83,629

Shareholders' equity 445,578 437,601 439,168

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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,274,094 $1,283,813 $1,278,748

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Current maturities of debt & long-term debt due after one year $ 459,612 $ 465,600 $ 489,451

Rock-Tenn Company Quarterly Statistics

Paperboard Group Operating Statistics

1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Fiscal Year ------------------------------------------------

Average Price Per Ton --------------------- Coated & Specialty Paperboard (a) 2003 $434 $418 $437 $438 $432 2004 440 439 456 470 451 2005 482 --- --- --- ---

Corrugated Medium 2003 343 335 340 333 338 2004 331 341 350 383 352 2005 394 --- --- --- ---

All Tons 2003 419 406 423 421 417 2004 422 424 439 455 435 2005 467 --- --- --- ---

Average Recovered Paper Cost 2003 82 78 88 86 83 2004 86 94 107 105 98 2005 102 --- --- --- ---

Tons Shipped ------------ Coated and Specialty (a) 2003 217,318 241,905 239,293 234,606 933,122 2004 230,710 248,743 248,078 224,881 952,412 2005 210,566 --- --- --- ---

Corrugated Medium 2003 40,815 41,459 40,413 45,023 167,710 2004 43,880 42,942 44,667 46,103 177,592 2005 42,691 --- --- --- ---

Total 2003 258,133 283,364 279,706 279,629 1,100,832 2004 274,590 291,685 292,745 270,984 1,130,004 2005 253,257 --- --- --- ---

(a) Specialty Paperboard Average Price Per Ton and Tons Shipped include tons shipped by Seven Hills Paperboard LLC, our joint venture with LaFarge Corporation.

Rock-Tenn Company Quarterly Statistics

Segment Sales and Operating Income (In Thousands)

1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Fiscal Year ---------------------------------------------------

Packaging Segment Sales 2003 $173,677 $196,277 $210,180 $221,268 $801,402 2004 208,875 231,772 231,526 235,912 908,085 2005 221,764 --- --- --- --- Packaging Income 2003 $4,924 $9,951 $10,792 $12,893 $38,560 2004 7,037 10,208 11,714 9,038 37,997 2005 5,274 --- --- --- --- Return On Sales 2003 2.8% 5.1% 5.1% 5.8% 4.8% 2004 3.4% 4.4% 5.1% 3.8% 4.2% 2005 2.4% --- --- --- ---

Merchandising Displays and Corrugated Packaging Segment Sales 2003 $75,067 $66,130 $71,738 $78,303 $291,238 2004 73,518 77,440 75,841 91,475 318,274 2005 79,510 --- --- --- --- Merchandising Displays and Corrugated Packaging Income 2003 $7,221 $5,266 $6,858 $9,224 $28,569 2004 5,932 7,507 6,096 9,540 29,075 2005 2,688 --- --- --- --- Return on Sales 2003 9.6% 8.0% 9.6% 11.8% 9.8% 2004 8.1% 9.7% 8.0% 10.4% 9.1% 2005 3.4% --- --- --- ---

Paperboard Segment Sales 2003 $121,797 $128,863 $128,855 $130,426 $509,941 2004 128,262 136,142 138,560 136,918 539,882 2005 128,703 --- --- --- --- Paperboard Income 2003 $5,308 $6,408 $6,017 $4,031 $ 21,764 2004 3,130 2,361 2,639 7,621 15,751 2005 4,354 --- --- --- --- Return on Sales 2003 4.4% 5.0% 4.7% 3.1% 4.3% 2004 2.4% 1.7% 1.9% 5.6% 2.9% 2005 3.4% --- --- --- ---

Rock-Tenn Company Quarterly Statistics

Key Financial Statistics (In Thousands except EPS Data)

1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Fiscal Year -------------------------------------------------

Income (Loss) From Continuing Operations 2003 $4,945 $7,131 $7,853 $9,612 $29,541 2004 4,166 3,009 (4,076) 6,552 9,651 2005 482 --- --- --- ---

Diluted EPS From Continuing Operations 2003 $0.14 $0.21 $0.23 $0.27 $0.85 2004 0.12 0.09 (0.12) 0.18 0.27 2005 0.01 --- --- --- ---

Net Income (Loss) 2003 $5,070 $7,330 $7,212 $9,964 $29,576 2004 11,879 2,910 (3,726) 6,585 17,648 2005 482 --- --- --- ---

Diluted EPS 2003 $0.15 $0.21 $0.21 $0.28 $0.85 2004 0.34 0.08 (0.11) 0.18 0.50 2005 0.01 --- --- --- ---

Depreciation & Amortization 2003 $17,953 $17,502 $17,791 $19,437 $72,683 2004 18,602 18,557 18,387 18,643 74,189 2005 18,451 --- --- --- ---

Capital Expenditures 2003 $16,393 $15,002 $12,114 $13,893 $57,402 2004 15,421 14,923 18,269 12,210 60,823 2005 10,174 --- --- --- ---

Reconciliation of Debt Measures (In Thousands)

December 31, September 30, December 31, 2004 2004 2003 -------------- ------------- ------------- Current maturities of debt $ 78,116 $ 83,906 $ 429 Long-term debt due after one year 381,496 381,694 489,022 -------------- ------------- ------------- Current maturities of debt and long-term debt due after one year 459,612 465,600 489,451 Less: cash and cash equivalents (63,188) (56,891) (59,958) -------------- ------------- ------------- Net debt, excluding interest rate swaps $ 396,424 $ 408,709 $ 429,493

--30--TM1/na*

CONTACT: Rock-Tenn Company, Norcross David Rees, 770-438-2193

KEYWORD: GEORGIA CHILE MEXICO INTERNATIONAL CANADA LATIN AMERICA INDUSTRY KEYWORD: FOREST PRODUCTS EARNINGS CONFERENCE CALLS SOURCE: Rock-Tenn Company

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