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8-K - ROCK-TENN COMPANY 8-K - Rock-Tenn CO | a50539654.htm |
Exhibit 99.1
Fical 2013 1st Quarter
Earnings Conference Call Presentation January 23, 2013 E xecuting Our
Strategy, Delivering Exceptional Value
Cautionary Statement
Regarding Forward-Looking Information Statements in this presentation
that do not relate strictly to historical facts are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including the slide entitled ―Key Financial
Statistics – FY’13 Outlook‖ that gives guidance for future periods in
2013. Forward-looking statements are based on our current expectations,
beliefs, plans or forecasts and use words in this presentation such as
will, estimate, trending, or refer to future time periods. You should
not place undue reliance on any forward-looking statements as such
statements involve risks, uncertainties, assumptions and other factors
that could cause actual results to differ materially, including the
following: our belief that the Corrugated industry fundamentals are
improving, our ability to integrate Smurfit-Stone or to achieve benefits
from the Smurfit-Stone Acquisition, including, without limitation,
synergies, performance improvements and successful implementation of
capital projects; expected price realization; expected levels of
depreciation and amortization, corporate expenses, interest expense,
income tax rates, federal NOLs, Black Liquor and AMT tax credits,
pension expense and contributions, capital expenditures, commodity
costs, maintenance outages, containerboard inventory builds; the level
of demand for our products; economic downtime; our ability to
successfully identify and make performance improvements; anticipated
returns on our capital investments; possible increases in energy, raw
materials, shipping and capital equipment costs; any reduction in the
supply of raw materials; fluctuations in selling prices and volumes;
intense competition; the potential loss of certain customers; adverse
changes in general market and industry conditions and other risks,
uncertainties and factors discussed in Item 1A "Risk Factors" and under
the caption "Business — Forward-Looking Information" in our 2012 Annual
Report on Form 10-K and by similar disclosures in any of our subsequent
SEC filings. The information contained herein speaks as of the date
hereof and we do not have or undertake any obligation to update such
information as future events unfold. 2
Disclaimer and Use of Non-GAAP Financial Measures and Reconciliations We may from time to time be in possession of certain information regarding RockTenn that applicable law would not require us to disclose to the public in the ordinary course of business, but would require us to disclose if we were engaged in the purchase or sale of our securities. This presentation shall not be considered to be part of any solicitation of an offer to buy or sell RockTenn securities. This presentation also may not include all of the information regarding RockTenn that you may need to make an investment decision regarding RockTenn securities. Any such investment decision should be made on the basis of the overall mix of information regarding RockTenn that is publicly available as of the date of such decision.We have included financial measures that are not prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The non-GAAP financial measures presented are not intended to be a substitute for GAAP financial measures, and any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP and the reconciliations of non-GAAP financial measures to GAAP financial measures included in the Appendix to this presentation 3
RockTenn 1Q’13 – Summary
Adjusted earnings up 14% over 1Q’12 to $1.35(1) RockTenn EBITDA margins
of 14.4%; Corrugated Packaging Segment EBITDA margins of 15.4%(2) $200
million of cash flow available for dividends, pension contributions in
excess of expense and net debt reduction Continued growth in
Smurfit-Stone acquisition synergies – 1Q’13 ending run rate in excess of
$300 million July Corrugated leadership changes driving improved
operating performance, cultural integration and results Solid execution
of containerboard and box price increase Hodge operating income
increased $12 million over the previous quarter Seasonal softness in
volume and pricing in Consumer Packaging grades (1)On a GAAP basis, EPS
was $1.18 in 1Q’13 and $1.06 in 1Q’12. See Use of Non-GAAP Financial
Measures and Reconciliations in the Appendix. (2)See Use of Non-GAAP
Financial Measures and Reconciliations in the Appendix. 4
$1.18 $0.25 ($0.12) $0.01
$0.03 1.35 $0.00$0.20$0.40$0.60$0.80$1.00$1.20$1.40$1.60 1Q’12 1Q’13 vs.
1Q’12 Adjusted EPS Bridge(1) 5 Consumer Packaging Recycling 1Q’13 Taxes
& Other Corrugated Packaging Segment Income higher by $28 million year
over year –Revenues higher on domestic containerboard and box price
increase –Export containerboard market prices improving –Sequential
containerboard and packaging shipments decreased seasonally –EBITDA
margin improved 170 basis points sequentially to 15.4% and 150 basis
points vs. prior year quarter –Improving industry fundamentals Consumer
Packaging Segment Income down on a year over year basis –Lower selling
prices in folding carton, coated and uncoated grades –Higher corrugated
costs in Merchandising Displays (1)On a GAAP basis, EPS was $1.18 in
1Q’13 and $1.06 in 1Q’12. See Use of Non-GAAP Financial Measures and
Reconciliations in the Appendix. 5
(1)On a GAAP basis, Total
Debt was $3.25 billion and $3.41 billion in 1Q’13 and 4Q’12,
respectively. See Use of Non-GAAP Financial Measures and Reconciliations
in the Appendix. (2)Cash Flow Per Share Calculation based on diluted
shares outstanding for the quarter of 72.7 million shares. Net Debt
Bridge: 1Q’13(1) 6 ($ Millions) 4Q’12 Pension in Excess of Expense Cash
Restructuring Cash Generated from Operations Capital Expenditures
Dividends Other 1Q’13 Net Debt 6
Net Debt Bridge: LTM 1Q’12
– 1Q’13(1) (1)On a GAAP basis, Total Debt was $3.25 billion and $3.48
billion in 1Q’13 and 1Q’12, respectively. See Use of Non-GAAP Financial
Measures and Reconciliations in the Appendix. (2)Cash Flow Per Share
Calculation based on average diluted shares outstanding for the four
quarter period of 72.3 million shares. ($ Millions) 1Q’12 Net Debt
Pension in Excess of Expense Cash Restructuring Cash Generated from
Operations Capital Expenditures Dividends Acquisitions & Investments
Other 1Q’13 Net Debt 7
8 Corrugated Packaging
1Q’13 vs. 1Q’12 Segment Performance Improvement in both domestic and
export market pricing Incremental price realization of $41 per ton by
end of 1Q’13; expect to exceed $50 per ton in 2Q’13 Increase in
packaging volumes Major maintenance outage downtime of 27,000 tons No
brown containerboard economic downtime; 4,000 tons of bleached white
foodboard downtime $23 million benefit from lower input costs as
compared to prior year Favorable: Recycled Fiber / DLK: $32 million;
Energy: $12 million Unfavorable: Wood: ($12) million, Chemicals: ($9)
million $16 million higher deferred outage expense in 1Q’13 vs.
1Q’12 (1) Excludes $0.4 million of inventory step-up expense in 1Q’12.
See Use of Non-GAAP Financial Measures and Reconciliations in the
Appendix. 8 9 Title: 1Q’13 vs. 1Q’12 Corrugated Packaging
EBITDA Bridge(1) Other Placeholder: 9 See Use of Non-GAAP Financial
Measures and Reconciliations in the Appendix. Other includes $16 million
of higher Deferred Outage Expense 10 Title: Consumer Packaging 1Q’13
vs. 1Q’12 Segment Performance Other Placeholder: 10 Pricing softness in
consumer grades and folding carton Economic Downtime No economic
downtime in 1Q’13 in the CRB system; 3,000 tons of economic downtime in
1Q’12 $4 million benefit from lower input costs as compared to prior
year Favorable: Recycled Fiber: $9 million Unfavorable: Wood:
($3),Corrugated: ($2) million Note: Converting shipments exclude
Merchandising Display shipments See Use of Non-GAAP Financial Measures
and Reconciliations in the Appendix. 11 Title: 1Q’13 vs. 1Q’12
Consumer Packaging EBITDA Bridge(1) Other Placeholder: 11 See Use of
Non-GAAP Financial Measures and Reconciliations in the Appendix. 11
12 Title: Recycling 1Q’13 vs. 1Q’12 Segment Performance Other
Placeholder: 12 Higher segment income due to cost reduction actions,
lower bad debt expense and better export recycled fiber pricing and
spreads to domestic OCC Administrative cost reduction actions have an
annualized benefit of $8 million See Use of Non-GAAP Financial
Measures and Reconciliations in the Appendix. 13 LTM Credit Agreement
EBITDA of $1.2 billion; Leverage Ratio of 2.77x (2) $1.18 billion of
liquidity available to RockTenn at 12/31/12 Used lower cost A/R
securitization debt to prepay quarterly term loan amortization payments
until 3/31/15 Title: RockTenn Capitalization Profile – 12/31/12 Other
Placeholder: 13 Debt Maturity Profile (millions) (2) See Use of
Non-GAAP Financial Measures and Reconciliations in the Appendix. (1)
Above excludes unamortized bond discounts and terminated swaps
aggregating $7.4 million 13 14 Title: Synergies and Performance
Improvements Other Placeholder: Run rate of synergy and performance
improvements at 12/31/12 in excess of $300 million On track for
achieving run rate of $550 million of synergy and performance
improvements during FY’14 Conversion to new box plant operational
planning system and standard costing is going well Fifteen box plants,
seven recycled facilities and one containerboard mill closed or in the
process of closing since acquisition Natural gas lines to mill gates
have all been completed Other Placeholder: 14 Current Run Rate
of Synergies and Performance Improvements Energy Projects 7% 15
Title: Key Inputs Other Placeholder: 15 Note: Excluding Wood Fiber
1Q’13 average prices based off of the following indices: Recycled Fiber
based on RockTenn weighted consumption by regional indices Natural Gas:
NYMEX Henry Hub Futures Fuel Oil: Platts New York #6 2.2% Cargo Diesel:
EIA U.S. Diesel Fuel Retail Average Price, Industrial Sector 15 16
Title: Key Financial Statistics – FY’13 Outlook Other Placeholder: 16
17 Title: Appendix Other Placeholder: 17 18 Title: Use of Non-GAAP
Financial Measures and Reconciliations Other Placeholder: 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. Non-GAAP Measures Our definitions
of Credit Agreement EBITDA and Segment EBITDA may differ from other
similarly titled measures at other companies. Credit Agreement EBITDA
(as defined) and Adjusted EBITDA (as defined) are not defined in
accordance with GAAP and should not be viewed as alternatives to GAAP
measures of operating results or liquidity. RockTenn management believes
that net income is the most directly comparable GAAP measure to Credit
Agreement EBITDA (as defined) and Segment Income is the most directly
comparable GAAP measure to Segment EBITDA. Other Placeholder: 18 19
Title: Non-GAAP Measures: Credit Agreement EBITDA and Total Funded Debt
(as defined) Other Placeholder: “Credit Agreement EBITDA” is calculated
in accordance with the definition of “EBITDA” contained in the Company’s
Credit Agreement. Credit Agreement EBITDA is generally defined as
Consolidated Net Income plus: consolidated interest expense;
consolidated tax expenses; depreciation and amortization expenses;
charges and expenses for financing fees and expenses and write-offs of
deferred financing fees and expenses, remaining portions of OID on
prepayment of indebtedness, premiums due in respect of prepayment of
indebtedness, and commitment fees in respect of financing commitments;
various charges and expenses related to, or incurred in connection with,
the Smurfit-Stone acquisition; costs and expenses relating to the
integration of Smurfit-Stone and the achievement of synergies relating
to the Smurfit-Stone acquisition; certain run-rate synergies expected to
be achieved due to the Smurfit-Stone acquisition; all non-cash charges;
all cash charges and expenses for plant and other facility closures and
other cash restructuring charges; labor disruption charges; officer
payments associated with any permitted acquisitions; “black liquor”
expenses; cash charges and expenses incurred in respect of the Chapter
11 bankruptcy proceeding and plan of reorganization of Smurfit-Stone;
and all non-recurring cash expenses taken in respect of any
multi-employer and defined benefit pension plan obligations that are
related to plant and other facilities closures. For additional
information on the calculation see our Credit Agreement, dated as of
September 27, 2012, filed as Exhibit 10.1 to our Form 8-K, dated
September 27, 2012. “Total Funded Debt” is calculated in accordance
with the definition of “Total Funded Debt” contained in the Company’s
Credit Agreement. 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, plus additional outstanding letters of credit
not already reflected in debt, plus debt guarantees. Other
Placeholder: 19 20 Title: Non-GAAP Measures: Credit Agreement EBITDA
and Total Funded Debt Other Placeholder: Our management uses Credit
Agreement EBITDA and Total Funded Debt to evaluate compliance with
RockTenn’s debt covenants and borrowing capacity available under its
Credit Agreement. Management also uses Credit Agreement EBITDA as a
measure of our Company’s core operating performance. Management
believes that investors also use these measures to evaluate the
Company’s compliance with its debt covenants and available borrowing
capacity. Management also believes that investors use Credit Agreement
EBITDA as a measure of our Company’s core operating performance.
Borrowing capacity is dependent upon, in addition to other measures, the
“Total Funded Debt/EBITDA ratio” or the “Leverage Ratio,” which is
defined as Total Funded Debt divided by Credit Agreement EBITDA. Other
Placeholder: 20 21 Title: Non-GAAP Measures: Net Debt Other
Placeholder: We have defined the non-GAAP measure “Net Debt” to include
the aggregate debt obligations reflected in our balance sheet, less the
hedge adjustments resulting from terminated and existing fair value
interest rate derivatives or swaps, the balance of our cash and cash
equivalents, restricted cash (which includes the balance sheet line
items restricted cash and restricted cash and marketable debt
securities) and certain other investments that we consider to be readily
available to satisfy such debt obligations. 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 and may be useful to investors 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. Other Placeholder: 21 22 Title: Non-GAAP
Measures: Adjusted Net Income and Adjusted Earnings Per Diluted Share
Other Placeholder: 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, the alternative fuel
mixture credit and cellulosic biofuel producer credit and other specific
items that management believes are not indicative of the ongoing
operating results of the business. The Company and the board of
directors use this information to evaluate the Company’s performance
relative to other periods. Other Placeholder: 22 23 Title: Segment
EBITDA Margins Other Placeholder: 23 1Q’13 ($ Millions, except
percentages) 23 24 Title: Segment EBITDA Margins Other Placeholder:
24 1Q’12 ($ Millions, except percentages) 24 (1) Corrugated
Packaging segment excludes $0.4 million of inventory step-up
expense 25 Title: Segment EBITDA Margins Other Placeholder:
25 4Q’12 ($ Millions, except percentages) (1) Corrugated Packaging
segment excludes $0.2 million of inventory step-up expense 25 26
Title: Adjusted EPS Reconciliation Other Placeholder: 26 (1)
Restructuring and other costs and operating losses and transition costs
due to plant closures. 27 Title: Net Debt Reconciliation Other
Placeholder: 27 28 Title: Credit Agreement EBITDA and Leverage Ratio
Other Placeholder: 28 (1) As specified in our Credit Agreement dated
September 27, 2012 29 Title: Credit Agreement EBITDA Breakout of
Additional Permitted Charges Other Placeholder: 29 29 (1) As specified
in our Credit Agreement dated September 27, 2012 30 Title: Credit
Agreement EBITDA and Margin Other Placeholder: 30 (1) As specified in
our Credit Agreement dated September 27, 2012. 31 Executing Our
Strategy, Delivering Exceptional Value