Rock-Tenn Company's ( RKT ) adjusted earnings shot up 127% to $2.16 per share in the third-quarter of fiscal 2013 (ended Jun 30, 2013) from 95 cents a share in the year-ago quarter. Results were way ahead of the Zacks Consensus Estimate of $1.66 per share.
Restructuring and other costs as well as operating losses and transition costs stemming from plant closures were 25 cents per share in the reported quarter compared to 14 cents per share in the year-ago quarter. Including these items, earnings in the third quarter were $1.91 per share compared with 81 cents in the year-ago quarter.
Operating Performance
Total revenue improved 6% year over year to $2.448 billion, but missed the Zacks Consensus Estimate of $2.461 billion. The top line increased on higher sales in Corrugated Packaging and Consumer Packaging, somewhat offset by a decline in sales in the Recycling segment. The results also reflect benefits from the implementation of capital projects and execution of sales and pricing strategy.
On a year-over-year basis, cost of goods sold remained flat at $1.95 billion. Gross profit increased 38% to $496.7 million. Gross margin expanded 460 basis points to 20%.
Selling, general and administrative expenses increased 6% to $244 million. Adjusted operating income grew a whopping 94% to $253 million.
Segmental Performance
Corrugated Packaging Segment : Net sales in the segment rose 11% year over year to $1.7 billion in the quarter. Operating income surged 167% year over year to $196 million. Results were aided by higher selling prices and containerboard volume, partly offset by higher commodity and other costs.
Consumer Packaging Segment : The segment's net sales grew 2.5% year over year to $644.8 million. Operating income declined 9% year over year to $76 million as a result of lower selling prices, higher cost of virgin fiber and energy, partly offset by higher volumes and lower recycled fiber costs.
Recycling : Net sales in the segment fell 19% year over year to $274.6 million due to lower volume and pricing. The segment reported operating income of $2 million, down 9% from $2.2 million in the year-ago quarter.
Financial Position
Cash and cash equivalents increased to $42.3 million as of Jun 30, 2013, from $37.2 million as of Sep 30, 2012. Cash provided by operating activities were $270 million for third-quarter fiscal 2013 compared to $203.6 million in the year-ago quarter. Debt-to-capitalization ratio improved to 43% as of Jun 30, 2013 from 50% as of Sep 30, 2012.
Shipment
Corrugated Packaging segment tons shipped increased by 102,000 tons over the prior-year quarter due to increased production from operating improvements and reduced maintenance outage tons. Consumer Packaging segment paperboard and pulp shipments increased about 15,000 tons from the prior-year quarter.
Our Take
RockTenn's strong earnings growth reflects continued improvements in its operating performance and higher containerboard and box pricing. Rock-Tenn's investment in box plants, installation of new standard corrugated box operating system and increase in domestic and export pricing will help to improve 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 retains a short-term Zacks Rank #1 (Strong Buy).
Other stocks with favorable Zacks Rank in the paper and packaging industry are KapStone Paper ( KS ) with Zacks Rank #1 (Strong Buy) and Resolute Forest Products Inc. ( RFP ) with a Zacks Rank #2 (Buy). Rock-Tenn's peer Orchids Paper Products Company ( TIS ) is yet to announce its quarterly result.
KAPSTONE PAPER (KS): Free Stock Analysis Report
RESOLUTE FOREST (RFP): Free Stock Analysis Report
ROCK-TENN CO (RKT): Free Stock Analysis Report
ORCHIDS PAPER (TIS): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
