Rock Tenn Co. (NYSE:RKT) Q2 2015 Earnings Conference Call - Final Transcript

Apr 30, 2015 • 09:00 am ET

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Rock Tenn Co. (NYSE:RKT) Q2 2015 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

My name is Ajel. I will be your conference operator for today. Conference will run for one hour, and at the end, we will conduct a question-and-answer session.

At this time, I would like to welcome everyone to the RockTenn Second Quarter Fiscal 2015 Earnings Conference Call. (Operator Instructions) As a reminder, slides are being presented today as part of the conference call. These slides can be accessed at www.rocktenn.com under the Investors page.

Ladies and gentlemen, this call is being recorded today, April 30. (Operator Instructions) Your speakers for today's call are Mr. Steve Voorhees, Chief Executive Officer; and Mr. Ward Dickson, Executive Vice President and Chief Financial Officer. Mr. Voorhees, you may begin your conference.

Executive
Steve Voorhees

Thank you very much. Welcome to our call. This is Steve Voorhees, Chief Executive Officer, and I'm joined this morning by Ward Dickson, Chief Financial Officer; Jim Porter, President of our Paper Solutions business; and Mike Kiepura, President of our Packaging Solutions business.

(Forward-Looking Cautionary Statements)

I'm going to start by discussing our operating results, and then Ward will discuss our balance sheet, pension and various financial measures. I will complete our prepared remarks with comments on the status of the merger with MWV and the outlook. Then Ward, Jim, Mike and I will be available for your questions.

The RockTenn team continued to deliver solid operating results in the March quarter. Adjusted earnings of $0.85 per share were 35% higher than last year's adjusted earnings of $0.63 per share. This improvement was driven by strong results in our Corrugated Packaging segment, where segment income increased 28% over last year. This increase was the result of strong external demand in corrugated and solid commercial execution and operational improvement in our mills and box plant system.

Additionally, we benefited from lower commodity costs. We were negatively affected by the combination of a substantial electrical failure at our Panama City mill and severe weather in February. These negative factors reduced earnings by $0.09 per share. We've seen our box shipments trend positively over the prior year shipments on a per-day basis since the second half of September of 2014. This trend continued during the December and March quarters for both RockTenn and overall industry.

RockTenn's March quarter box shipments increased 5.4% on an equivalent per-day basis and actual shipments increased 3.7%, both of these are as compared to the prior year. There was one less shipping day in the quarter this year versus last year, and both numbers significantly exceeded the comparable industry numbers.

We also saw very good end market demand in our folding carton business, where volumes were up 1.1% compared to the prior-year quarter. Performance in our Merchandising Displays business is not meeting our expectations. Segment income for the quarter was $12 million less than last quarter. I will speak to our Displays segment in more detail later in these prepared remarks.

Our adjusted EPS of $0.85 is higher than the updated guidance range we provided at the end of March. While I