Rock-Tenn Company Reports Record Earnings of $0.63 per diluted share for the Quarter Ended June 30, 2007, a 110% Increase Over the Prior Year Quarter

Rock-Tenn Company (NYSE:RKT) today reported record earnings for the quarter ended June 30, 2007 of $0.63 per diluted share on record quarterly sales. Third Quarter Results Net sales for the third quarter of fiscal 2007 increased 7.9% from the third quarter of fiscal 2006 to $591.4 million, an increase of $43.1 million. Segment income of $59.3 million increased $24.6 million from the prior year quarter. The Company reported net income of $25.2 million, or $0.63 per diluted share, for its third fiscal quarter of 2007. The Company reported net income of $11.0 million, or $0.30 per diluted share, in the prior year quarter. Income for the third quarter of fiscal 2007 included pre-tax restructuring and other costs of $0.6 million, or $0.01 per diluted share after-tax. Income for the third quarter of fiscal 2006 included pre-tax restructuring and other costs of $2.7 million, or $0.05 per diluted share after-tax. Segment Results Packaging Products Segment Packaging Products segment net sales were $319.0 million in the third quarter of fiscal 2007 compared to $326.2 million in the prior year quarter, with higher unit pricing in the fiscal 2007 quarter representing pass through of higher paperboard costs offset by lower sales volumes. Segment income of $12.4 million in the third quarter of fiscal 2007 was $0.8 million lower than the third quarter of fiscal 2006. Segment return on sales was 3.9% compared to 4.0% in the prior year quarter, as operating efficiencies and cost reductions partially offset the effect of lower sales volumes and higher paperboard costs. Paperboard Segment Paperboard segment net sales increased $43.6 million from the prior year quarter to $247.7 million in the third quarter of fiscal 2007, on higher selling prices and an increase in tons shipped from the Company’s mills. Bleached paperboard tons shipped increased 17.7% over the prior year quarter to 90,102 tons. The average selling price for all paperboard grades increased $49 per ton over the prior year quarter. Segment income of $34.1 million increased $15.2 million over the prior year quarter. Merchandising Displays Segment Merchandising Displays segment net sales were $76.8 million in the third quarter of fiscal 2007, as compared to $58.8 million in the prior year third quarter, on strong demand for promotional displays. Segment income was $10.8 million in the third quarter of fiscal 2007 compared to $1.6 million in the prior year quarter. Corrugated Segment Corrugated segment net sales increased $4.0 million over the prior year quarter to $40.6 million in the third quarter of fiscal 2007, primarily due to increased production at the Company’s corrugators and higher selling prices. Segment income was $2.0 million in the third quarter of fiscal 2007 and $1.0 million in the prior year quarter. Chairman and Chief Executive Officer’s Statement Rock-Tenn Company Chairman and Chief Executive Officer James A. Rubright stated, "Our record results and strong year over year and sequential quarter gains reflect the value we bring to our paperboard and packaging customers. Our strategy of offering high quality products produced at very low costs is paying off in today's marketplace where customers continue to choose sustainable paperboard packaging. Supply and demand for bleached and recycled paperboard continue to be in tight balance. Our promotional display business continues to record strong year over year sales and earnings gains, strengthening its position as the market leader for new product launches and major product promotions.” Cash Provided By Operating Activities Net cash provided by operating activities in the third quarter of fiscal 2007 was $71.8 million, an increase of $36.4 million over the prior year quarter. Financing and Investing Activities During the quarter Rock-Tenn Company contributed $16.1 million to its pension plans and decreased debt by $49.6 million. The Company’s Credit Agreement Debt/EBITDA ratio was 2.60 times as of June 30, 2007, based on Credit Agreement EBITDA for the twelve months ended June 30, 2007 of $284.0 million. Conference Call The Company will host a conference call to discuss its results of operations for the third quarter of fiscal 2007 and other topics that may be raised during the discussion at 9:00 a.m., Eastern Time, on July 25, 2007. The conference call will be webcast and can be accessed, along with a copy of this press release and any other statistical information related to the conference call, at www.rocktenn.com. About Rock-Tenn Company Rock-Tenn Company provides a wide range of marketing and packaging solutions to consumer products companies at low costs, with annual net sales of approximately $2.3 billion and operating locations in the United States, Canada, Mexico, Argentina and Chile. The Company is one of North America's leading manufacturers of packaging products, merchandising displays and bleached and recycled paperboard. ROCK-TENN COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)         FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED June 30, June 30, June 30, June 30,     2007       2006       2007     2006       NET SALES $ 591.4 $ 548.3 $ 1,711.0 $ 1,568.4   Cost of Goods Sold   472.2       456.3       1,381.8     1,327.6       Gross Profit 119.2 92.0 329.2 240.8 Selling, General and Administrative Expenses 65.7 62.0 190.5 181.1 Restructuring and Other Costs   0.6       2.7       2.3     7.2       Operating Profit 52.9 27.3 136.4 52.5 Interest Expense (11.8 ) (14.3 ) (37.1 ) (42.1 ) Interest and Other Income(Expense), net (1.3 ) 0.6 (1.1 ) 1.2 Equity in Income of Unconsolidated Entities 0.6 --- 1.3 1.4 Minority Interest in Income of Consolidated Subsidiaries   (0.8 )     (1.6 )     (3.8 )   (4.7 )     INCOME BEFORE INCOME TAXES 39.6 12.0 95.7 8.3   Income Tax Expense   (14.4 )     (1.0 )     (33.7 )   (1.1 )       NET INCOME $ 25.2     $ 11.0     $ 62.0   $ 7.2     Weighted Average Common Shares Outstanding-Diluted   40.1       36.9       39.6     36.6       Diluted Earnings Per Share $ 0.63     $ 0.30     $ 1.57   $ 0.20   ROCK-TENN COMPANY SEGMENT INFORMATION (UNAUDITED) (IN MILLIONS, EXCEPT TONNAGE DATA)           FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED June 30, June 30, June 30, June 30,     2007       2006       2007       2006       NET SALES:   Packaging Products Segment $ 319.0 $ 326.2 $ 934.9 $ 947.0 Paperboard Segment 247.7 204.1 690.1 597.5 Merchandising Displays Segment 76.8 58.8 220.3 163.8 Corrugated Segment 40.6 36.6 117.6 96.9 Intersegment Eliminations   (92.7 )     (77.4 )     (251.9 )     (236.8 )     TOTAL NET SALES $ 591.4     $ 548.3     $ 1,711.0     $ 1,568.4       SEGMENT INCOME:   Packaging Products Segment $ 12.4 $ 13.2 $ 37.2 $ 33.4 Paperboard Segment 34.1 18.9 84.9 33.7 Merchandising Displays Segment 10.8 1.6 28.1 7.6 Corrugated Segment   2.0       1.0       6.2       2.4         TOTAL SEGMENT INCOME $ 59.3 $ 34.7 $ 156.4 $ 77.1   Restructuring and Other Costs (0.6 ) (2.7 ) (2.3 ) (7.2 ) Non-Allocated Expense (5.2 ) (4.7 ) (16.4 ) (16.0 ) Interest Expense (11.8 ) (14.3 ) (37.1 ) (42.1 ) Interest and Other Income(Expense), net (1.3 ) 0.6 (1.1 ) 1.2 Minority Interest in Income of Consolidated Subsidiaries   (0.8 )     (1.6 )     (3.8 )     (4.7 )     INCOME BEFORE INCOME TAXES $ 39.6 $ 12.0 $ 95.7 $ 8.3                     Recycled Paperboard Shipped (in tons) 270,439 264,761 805,749 786,984 Bleached Paperboard Shipped (in tons) 90,102 76,579 246,275 236,450 Pulp Shipped (in tons)   25,551       23,645       71,095       66,550   ROCK-TENN COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN MILLIONS) FOR THE THREE MONTHS ENDED FOR THE NINE MONTH ENDED June 30, June 30, June 30, June 30,     2007       2006       2007       2006       CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 25.2 $ 11.0 $ 62.0 $ 7.2   Items in income not affecting cash: Depreciation and amortization 26.0 26.1 77.5 77.8 Deferred income tax (benefit) expense 3.1 (9.1 ) 11.8 (1.8 ) Share-based compensation expense 1.7 1.0 5.3 2.5 (Gain) loss on disposal of plant, equipment and other, net (0.7 ) (1.3 ) 0.5 (1.2 ) Equity in income of unconsolidated entities (0.6 ) --- (1.3 ) (1.4 ) Minority interest in income of consolidated subsidiaries 0.8 1.6 3.8 4.7 Proceeds from (payment on) termination of cash flow interest rate hedges --- 4.6 (0.2 ) 14.5 Pension funding more than expense (13.0 ) (7.9 ) (11.2 ) (8.2 ) Impairment adjustments and other non-cash items 0.9 1.1 1.0 2.8 Net changes in operating assets and liabilities   28.4       8.3       (8.2 )     1.3       NET CASH PROVIDED BY OPERATING ACTIVITIES $ 71.8     $ 35.4     $ 141.0     $ 98.2       INVESTING ACTIVITIES:   Capital expenditures (17.9 ) (19.1 ) (58.7 ) (46.2 ) Cash paid for purchase of businesses, net of cash received (0.1 ) --- (32.1 ) (7.8 ) Investment in unconsolidated entities (0.8 ) --- (9.5 ) --- Return of capital from unconsolidated entities 2.2 --- 6.3 --- Proceeds from sale of property, plant and equipment 0.3 3.6 2.6 4.4 Proceeds from property, plant and equipment insurance settlement   0.9       ---       1.3       ---       NET CASH USED FOR INVESTING ACTIVITIES $ (15.4 )   $ (15.5 )   $ (90.1 )   $ (49.6 )     FINANCING ACTIVITIES:   Additions to revolving credit facilities 14.6 4.0 46.6 64.5 Repayments of revolving credit facilities (12.3 ) (35.1 ) (72.5 ) (161.5 ) Additions to debt 0.2 15.8 22.1 47.2 Repayments of debt (55.4 ) (3.7 ) (69.8 ) (17.1 ) Debt issuance costs --- --- --- (0.3 ) Issuances of common stock (0.3 ) 2.7 29.7 5.6 Excess tax benefits from share-based compensation 0.2 0.1 14.4 0.2 Capital contributed to consolidated subsidiary from minority interest --- --- --- 2.1 Advances from (repayments to) unconsolidated entity (0.9 ) 1.6 (5.9 ) 7.2 Cash dividends paid to shareholders (4.0 ) (3.3 ) (11.4 ) (9.9 ) Cash distributions paid to minority interest   (1.4 )     (1.9 )     (2.7 )     (4.8 )     NET CASH USED FOR FINANCING ACTIVITIES $ (59.3 )   $ (19.8 )   $ (49.5 )   $ (66.8 )     Effect of exchange rate changes on cash and cash equivalents (0.6 ) (0.2 ) (0.2 ) (0.6 )   INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3.5 ) (0.1 ) 1.2 (18.8 )   Cash and cash equivalents at beginning of period   11.6       8.1       6.9       26.8     Cash and cash equivalents at end of period $ 8.1     $ 8.0     $ 8.1     $ 8.0       SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:   Cash paid during the period for: Income taxes, net of refunds $ 1.7 $ 1.4 $ 7.8 $ 5.4 Interest, net of amounts capitalized   6.8       9.1       35.0       38.3   ROCK-TENN COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN MILLIONS)         June 30, March 31, September 30,     2007   2007   2006     ASSETS:   Cash and cash equivalents $ 8.1 $ 11.6 $ 6.9   Receivables - net 234.9 231.7 230.8   Inventories - at LIFO cost 218.3 220.6 218.9   Other current assets 26.6 34.8 25.0   Current assets held for sale   1.9   2.3   4.0     TOTAL CURRENT ASSETS   489.8   501.0   485.6     Land, building and equipment - net 836.1 838.0 850.6   Intangible and other assets   474.0   472.4   447.8     TOTAL ASSETS $ 1,799.9 $ 1,811.4 $ 1,784.0       LIABILITIES AND SHAREHOLDERS' EQUITY:   Current portion of debt $ 135.4 $ 125.8 $ 40.8   Other current liabilities   259.9   243.7   265.2 TOTAL CURRENT LIABILITIES   395.3   369.5   306.0   Long-term maturities of debt 588.5 647.3 754.9 Hedge adjustments resulting from terminated fair value interest rate derivatives or swaps 9.1 9.5 10.4   Total long-term debt 597.6 656.8 765.3   Accrued pension and other long-term benefits 64.1 77.4 75.9   Deferred income taxes 113.6 108.1 99.8   Other long-term liabilities 7.1 9.7 9.6   Minority interest 10.4 11.0 18.8   Shareholders' equity   611.8   578.9   508.6     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,799.9 $ 1,811.4 $ 1,784.0 Rock-Tenn Company Quarterly Statistics   Paperboard Group Operating Statistics     1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Fiscal Year Average Price Per Ton (a)(c) All Tons 2005 $467 $472 $491 $523 $492 2006 524 526 539 561 538 2007 558 571 588   Tons Shipped Coated and Specialty (a) 2005 210,566 209,706 211,628 209,721 841,621 2006 208,325 223,469 220,596 229,086 881,476 2007 221,506 222,970 225,135   Corrugated Medium 2005 42,691 45,228 44,758 44,841 177,518 2006 44,985 45,444 44,165 47,045 181,639 2007 44,615 46,219 45,304   Bleached Paperboard (b) 2005 — — 26,713 84,169 110,882 2006 79,152 80,719 76,579 83,799 320,249 2007 73,968 82,205 90,102   Market Pulp (b) 2005 — — 6,933 23,104 30,037 2006 14,994 27,911 23,645 20,019 86,569 2007 20,883 24,661 25,551     Total (b) 2005 253,257 254,934 290,032 361,835 1,160,058 2006 347,456 377,543 364,985 379,949 1,469,933 2007 360,972 376,055 386,092     (a) Average Price Per Ton and Tons Shipped include tons shipped by Seven Hills Paperboard LLC, our unconsolidated joint venture with LaFarge North America, Inc.   (b) Bleached paperboard and market pulp tons shipped began in June 2005 as a result of the Gulf States acquisition.     (c) Beginning in the third quarter of fiscal 2005, Average Price Per Ton includes coated and specialty recycled paperboard, corrugated medium, bleached paperboard and market pulp.   Rock-Tenn Company Quarterly Statistics   Segment Sales and Segment Income (In Millions)   1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Fiscal Year   Packaging Products Segment Sales 2005 $221 .8 $218 .8 $239 .2 $314 .2 $994 .0 2006 301 .1 319 .7 326 .2 320 .8 1,267 .8 2007 303 .1 312 .8 319 .0 Packaging Products Segment Income 2005 $5 .3 $5 .7 $10 .6 $11 .8 $33 .4 2006 6 .8 13 .4 13 .2 11 .6 45 .0 2007 11 .7 13 .1 12 .4 Return On Sales 2005 2 .4 % 2 .6 % 4 .4 % 3 .8 % 3 .4 % 2006 2 .3 % 4 .2 % 4 .0 % 3 .6 % 3 .5 % 2007 3 .9 % 4 .2 % 3 .9 %   Paperboard Segment Sales 2005 $128 .7 $131 .8 $155 .0 $199 .9 $615 .4 2006 187 .7 205 .7 204 .1 222 .2 819 .7 2007 210 .8 231 .6 247 .7 Paperboard Segment Income (Loss) 2005 $ 4 .4 $3 .6 $7 .6 $16 .0 $31 .6 2006 (1 .0)   15 .8 18 .9 28 .5 62 .2 2007 23 .9 26 .9 34 .1 Return on Sales 2005 3 .4 % 2 .7 % 4 .9 % 8 .0 % 5 .1 % 2006 (0 .5) % 7 .7 % 9 .3 % 12 .8 % 7 .6 % 2007 11 .3 % 11 .6 % 13 .8 %   Merchandising Displays Segment Sales 2005 $52 .7 $59 .0 $57 .0 $57 .6 $226 .3 2006 49 .2 55 .8 58 .8 69 .4 233 .2 2007 60 .9 82 .6 76 .8 Merchandising Displays Segment Income 2005 $2 .4 $3 .7 $5 .4 $6 .1 $17 .6 2006 2 .8 3 .2 1 .6 8 .8 16 .4 2007 5 .1 12 .2 10 .8 Return on Sales 2005 4 .6 % 6 .3 % 9 .5 % 10 .6 % 7 .8 % 2006 5 .7 % 5 .7 % 2 .7 % 12 .7 % 7 .0 % 2007 8 .4 % 14 .8 % 14 .1 %   Corrugated Segment Sales 2005 $28 .8 $30 .2 $29 .8 $29 .7 $118 .5 2006 28 .4 31 .9 36 .6 38 .8 135 .7 2007 36 .6 40 .4 40 .6 Corrugated Segment Income 2005 $0 .3 $1 .1 $1 .0 $1 .1 $3 .5 2006 0 .4 1 .0 1 .0 1 .6 4 .0 2007 1 .8 2 .4 2 .0 Return on Sales 2005 1 .0 % 3 .6 % 3 .4 % 3 .7 % 3 .0 % 2006 1 .4 % 3 .1 % 2 .7 % 4 .1 % 2 .9 % 2007 4 .9 % 5 .9 % 4 .9 % Rock-Tenn Company Quarterly Statistics     Key Financial Statistics (In Millions, except EPS Data)       1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Fiscal Year   Net Income (Loss) 2005 $ 0 .5 $ 0 .2 $ 12 .0 $ 4 .9 $ 17 .6 2006 (9 .0) 5 .2 11 .0 21 .5 28 .7 2007 15 .1 21 .7 25 .2   Diluted EPS 2005 $ 0 .01 $ 0 .01 $ 0 .33 $ 0 .14 $ 0 .49 2006 (0 .25) 0 .14 0 .30 0 .57 0 .77 2007 0 .39 0 .55 0 .63   Depreciation & Amortization 2005 $ 18 .5 $ 18 .5 $ 20 .5 $ 26 .5 $ 84 .0 2006 25 .8 25 .9 26 .1 26 .5 104 .3 2007 26 .0 25 .5 26 .0   Capital Expenditures 2005 $ 10 .2 $ 12 .2 $ 11 .8 $ 20 .1 $ 54 .3 2006 13 .5 13 .6 19 .1 18 .4 64 .6 2007 17 .3 23 .5 17 .9 Non-GAAP Measures We have included in the discussion under the caption "Financing and Investing Activities” above financial measures that are not prepared in accordance with GAAP. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. 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. Credit Agreement EBITDA and Total Funded Debt "Credit Agreement EBITDA” is calculated in accordance with the definition contained in the Company’s Senior Credit Facility. Credit Agreement EBITDA is generally defined as Consolidated Net Income plus: consolidated interest expense, income taxes of the consolidated companies determined in accordance with GAAP, depreciation and amortization expense of the consolidated companies determined in accordance with GAAP, certain non-cash and cash charges incurred, and charges taken resulting from the impact of changes to accounting rules related to the expensing of stock options. "Total Funded Debt” is calculated in accordance with the definition contained in the Company’s Senior Credit Facility. 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. Our management uses Credit Agreement EBITDA and Total Funded Debt to evaluate compliance with Rock-Tenn’s debt covenants and borrowing capacity available under its Senior Credit Facility. Management believes that investors also use these measures to evaluate the Company’s compliance with its debt covenants and available borrowing capacity. Borrowing capacity is dependent upon, in addition to other measures, the "Credit Agreement Debt/EBITDA ratio” or the "Leverage Ratio,” which is defined as Total Funded Debt divided by Credit Agreement EBITDA. As of the June 30, 2007 calculation, the Company’s Leverage Ratio was 2.60 times, which compares to a maximum Leverage Ratio under the Senior Credit Facility of 4.25 times. Credit Agreement EBITDA and Total Funded Debt are not intended to be substitutes for GAAP financial measures and should not be used as such. Set forth below is a reconciliation of Credit Agreement EBITDA to the most directly comparable GAAP measure, net income:     (In Millions) 12 Months Ended June 30, 2007   Net Income $83.5 Interest Expense and Other Income 51.3 Income Taxes 42.5 Depreciation and Amortization 102.8 Additional Permitted Charges 3.9   Credit Agreement EBITDA $284.0 Set forth below is a reconciliation of Total Funded Debt to the most directly comparable GAAP measures, Current Portion of Debt and Total Long-Term Debt: (In Millions) June 30, 2007   Current Portion of Debt $ 135.4 Total Long-Term Debt 597.6 Total Debt 733.0 Less: Hedge Adjustments Resulting From Terminated Fair Value Interest Rate Derivatives or Swaps (9.1) Total Debt Less Hedge Adjustments 723.9 Plus: Letters of Credit 13.6 Total Funded Debt $ 737.5