RockTenn Company Reports Operating Results (10-K)
Rock-tenn has a market cap of $4.48 billion; its shares were traded at around $64.42 with a P/E ratio of 14.1 and P/S ratio of 0.5. The dividend yield of Rock-tenn stocks is 1.4%. Rock-tenn had an annual average earning growth of 14.4% over the past 10 years. GuruFocus rated Rock-tenn the business predictability rank of 4-star.
Highlight of Business Operations:Net sales of $9,207.6 million for fiscal 2012 increased $3,808.0 million, or 70.5% over fiscal 2011, primarily as a result of the May 27, 2011, Smurfit-Stone Acquisition. Segment income of $718.3 million in fiscal 2012, adjusted to eliminate $6.7 million of pre-tax losses at our recently closed Matane, Quebec containerboard mill and $0.8 million of pre-tax acquisition inventory step-up expense increased to $725.8 million, or an increase of 22.8%, compared to adjusted segment income of $591.1 million in fiscal 2011, after adjusting segment income of $531.7 million to eliminate $59.4 million of pre-tax acquisition inventory step-up expense. The increase in fiscal 2012 was primarily due to the full year inclusion of the Smurfit-Stone operations. Segment income and adjusted segment income in fiscal 2012 were also impacted by $16.1 million received in connection with the termination and settlement of a paperboard supply agreement, net of legal fees, a $47.7 million increase in amortization of major maintenance outage expense in our containerboard mills, an estimated $34 million impact of higher start-up costs and lost production after the major capital investments at our Hodge, LA mill relative to our expectations, and higher freight and chemical costs that were partially offset by lower recycled fiber costs and energy costs.
Net income attributable to Rock-Tenn Company shareholders in fiscal 2012 was $249.1 million compared to $141.1 million in fiscal 2011 and earnings per diluted share were $3.45 and $2.77 in fiscal 2012 and fiscal 2011, respectively. Adjusted net income attributable to Rock-Tenn Company shareholders in fiscal 2012 increased $44.7 million over fiscal 2011 to $323.7 million and adjusted earnings per diluted share were $4.48 and $5.50, respectively. See our reconciliations of the non-GAAP measures adjusted earnings per diluted share and adjusted net income.
Cost of goods sold increased to $4,407.7 million in fiscal 2011 compared to $2,281.3 million in fiscal 2010 primarily as a result of increased sales from the acquired Smurfit-Stone operations. Cost of goods sold as a percentage of net sales increased in fiscal 2011 compared to fiscal 2010 primarily as a result of the acquired lower margin Smurfit-Stone business, increased recycled fiber, chemical, energy and freight costs and $59.4 million of acquisition inventory step-up expense associated with the Smurfit-Stone Acquisition, which were partially offset by reduced virgin fiber costs. Cost of goods sold in the prior year was also reduced by $28.8 million of alternative fuel mixture credits, net of expenses. Recycled fiber, chemical and energy costs in our legacy mills increased $47 per ton, $6 per ton and $1 per ton, respectively. Freight expense, excluding the impact of the Smurfit-Stone Acquisition, increased $18.8 million due in part to higher volumes. Virgin fiber costs in our legacy bleached paperboard mill decreased $33 per ton and income related to foreign currency transactions increased $4.4 million.
SG&A expenses increased $201.3 million to $541.2 million in fiscal 2011 compared to $339.9 million in fiscal 2010. The SG&A increases were primarily due to the Smurfit-Stone Acquisition and declined as a percentage of net sales in fiscal 2011 compared to fiscal 2010 primarily due to synergies we realized as part of the Smurfit-Stone Acquisition and higher volumes and selling prices. Excluding SG&A associated with the acquired Smurfit-Stone locations of approximately $178.2 million, SG&A increased primarily due to increased compensation costs aggregating $12.7 million, increased professional fees and consulting expense for various initiatives of $6.1 million, partially offset by decreased commissions expense of $4.2 million.
Net cash provided by operating activities during fiscal 2012 and fiscal 2011 was $656.7 million and $461.7 million, respectively. Net cash provided by operating activities during fiscal 2012 includes $305.4 million of pension and other postretirement funding more than expense, a $12.8 million benefit payment to a former Smurfit-Stone executive and an aggregate $15.9 million use of operating assets and liabilities, net of acquisitions. Net cash provided by operating activities during fiscal 2011 and fiscal 2010 were $461.7 million and $377.3 million, respectively. Net cash provided by operating activities during fiscal 2011 included pension and other postretirement funding more than expense of $22.7 million compared to pension funding less than expense of $10.5 million in fiscal 2010. Pension and other postretirement funding more than expense increased in fiscal 2012 primarily due to the full year impact of the Smurfit-Stone Acquisition. Fiscal 2011 included a net increase in operating assets and liabilities, net of acquisitions, excluding income taxes of $37.2 million primarily associated with receivables to support increased sales and to fund taking cash payment discounts on legacy Smurfit operations purchases compared to a net increase of $10.4 million in fiscal 2010. In fiscal 2010 our net cash tax payments were increased by approximately $23 million as we returned to the Internal Revenue Service approximately $49 million of the $84 million that we had previously claimed for the alternative fuel mixture credits, which was partially offset by the receipt of our $26 million fiscal 2009 federal income tax refund.
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