) declined 12% since it reported fourth-quarter 2013 results on
Nov 4. Despite reporting record earnings per share of $2.66 in
the fourth quarter, shares dropped due to concerns regarding the
negative impact of cost headwinds and anticipated downtime on
2014 results. The 91% year-over-year growth in the quarter was
driven by strong operating performance, higher pricing and
continued productivity improvements, partially offset by higher
KAPSTONE PAPER (KS): Free Stock Analysis
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Restructuring and other costs and operating losses and transition
costs due to plant closures were 26 cents per share in the
reported quarter. Including these items, earnings in the fourth
quarter were $2.40 per share versus $1.14 in the year-ago
quarter. Prior-year quarter earnings included restructuring and
other costs of 19 cents and loss on extinguishment of debt of 6
cents per share.
Total revenue improved 5.3% year over year to $2,485 million, but
missed the Zacks Consensus Estimate of $2,557 million.
On a year-over-year basis, cost of goods sold remained flat at
$1,930 million. Gross profit improved 32% year over year to $555
million. Gross margin expanded 450 basis points (bps) to 22.3%.
Selling, general and administrative expenses increased 3% year
over year to $250 million. Adjusted operating income surged 72%
to $305 million.
Net sales in the segment rose 8% year over year to $1.7 billion
in the quarter. Operating income surged 111% year over year to
$238 million. Results were aided by higher selling prices and
increased synergies, partially offset by higher commodity and
The segment's net sales increased 1.6% year over year to $671.5
million. Operating income declined 10% year over year to $89
million as a result of higher commodity and other costs, partly
offset by higher selling prices and volumes.
Net sales in the segment went up 4.4% year over year to $276
million led by increased selling prices. The segment reported
operating income of $4.6 million against a loss of $2.8 million
in the year-ago quarter attributable to the impact of improved
Fiscal 2013 Performance
Rock-Tenn posted adjusted earnings of $7.30 per share for fiscal
2013, a 63% increase from $4.48 in fiscal 2012. Earnings were
ahead of the Zacks Consensus Estimate of $6.44. Including special
items, the company posted earnings of $9.95 per share versus
$3.45 a year ago.
Revenues for the full-year increased 3.7% year over year to $9.54
billion from $9.20 billion in fiscal 2012. It surpassed the Zacks
Consensus Estimate of $9.7 billion.
As of Sep 30, 2013, cash and cash equivalents amounted to $36.4
million versus $37.2 million as of Sep 30, 2012. Long-term debt
was $2,842 million as of Sep 30, 2013, compared to $3,151 million
in the year ago quarter. The debt-to-capitalization ratio
contracted 100 bps to 40% as of Sep 30, 2013, from 50% as of Sep
Cash from operations for the twelve-month period ended Sep 30,
2013, were $1032.5 million, up 57% from $656.7 million in the
year-ago comparable period.
On Oct 25, 2013, Rock-Tenn declared a 17% increase in its annual
dividend to $1.40 per share. The new dividend will be paid on Nov
The Corrugated Packaging segment's shipment decreased by 34,000
tons from the year-ago quarter due to lower domestic sales.
However, the Consumer Packaging segment's paperboard and pulp
shipments increased about 16,000 tons compared to the prior-year
RockTenn's strong earnings growth reflects continued improvement
in its operating performance. Strong balance sheet and cash flow
will help in returning capital to shareholders through dividends
and stock repurchases. Rock-Tenn's investment in box plants,
installation of new standard corrugated box operating system and
increase in domestic and export pricing will help will help in
improving its profitability.
Norcross, GA-based RockTenn is one of the leading integrated
manufacturers of corrugated and consumer packaging and recycling
solutions in North America. It operates in the U.S., Canada,
Mexico, Chile, Argentina and China.
Rock-Tenn currently holds a short-term Zacks Rank #5 (Strong
Other stocks with favorable Zacks Rank in the paper and packaging
KapStone Paper and Packaging Corporation
Svenska Cellulosa Aktiebolaget SCA (publ)
) both carrying Zacks Rank #1 (Strong Buy), and
Orchids Paper Products Company
) which holds a Zacks Rank #2 (Buy).