-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SCmYAA1YPG0w5TzSsXn5t6IGW4iA+j6xKbX0FjQRpx6+6i439f0dx1ILPbu9bENx iGNVrt/LmVbAeapse1rqnQ== 0000950144-01-502494.txt : 20010516 0000950144-01-502494.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950144-01-502494 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCK TENN CO CENTRAL INDEX KEY: 0000230498 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD CONTAINERS & BOXES [2650] IRS NUMBER: 620342590 STATE OF INCORPORATION: GA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12613 FILM NUMBER: 1639471 BUSINESS ADDRESS: STREET 1: 504 THRASHER ST CITY: NORCROSS STATE: GA ZIP: 30071 BUSINESS PHONE: 7704482193 MAIL ADDRESS: STREET 1: PO BOX 4098 CITY: NORCROSS STATE: GA ZIP: 30091 10-Q 1 g69494e10-q.txt ROCK-TENN COMPANY 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 2001 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number 0-23340 ROCK-TENN COMPANY (Exact name of registrant as specified in its charter) Georgia 62-0342590 ------------------------------ ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 504 Thrasher Street, Norcross, Georgia 30071 -------------------------------------- ----------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (770) 448-2193 -------------- N/A -------------------------------------------------------------- (Former name or former address, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding as of May 14, 2001 - ----------------------------------- ------------------------------ Class A Common Stock, .01 par value 22,692,665 Class B Common Stock, .01 par value 10,647,807 ================================================================================ 2 ROCK-TENN COMPANY INDEX
Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Operations for the three months and six months ended March 31, 2001 and 2000 1 Condensed Consolidated Balance Sheets at March 31, 2001 and September 30, 2000 2 Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2001 and 2000 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 21 Item 6. Exhibits and Reports on Form 8-K 22 Index to Exhibits 24
3 PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ROCK-TENN COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Six Months Ended March 31, March 31, March 31, March 31, 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------------- Net sales $ 367,410 $ 369,940 $ 712,579 $ 716,761 Cost of goods sold 293,615 296,303 572,814 570,927 ---------- ---------- ---------- ---------- Gross profit 73,795 73,637 139,765 145,834 Selling, general and administrative expenses 45,164 45,648 87,886 88,518 Amortization of goodwill 2,142 2,357 4,285 4,713 Plant closing and other costs 3,175 52,725 5,040 55,199 ---------- ---------- ---------- ---------- Income (loss) from operations 23,314 (27,093) 42,554 (2,596) Interest and other income 101 83 297 188 Interest expense (9,370) (8,465) (19,394) (16,459) Minority interest in income of consolidated subsidiary (777) (1,274) (1,524) (2,435) ---------- ---------- ---------- ---------- Income (loss) before income taxes 13,268 (36,749) 21,933 (21,302) Provision for income taxes 5,950 (3,493) 10,110 3,344 ---------- ---------- ---------- ---------- Income (loss) before cumulative effect of a change in accounting principle 7,318 (33,256) 11,823 (24,646) Cumulative effect of a change in accounting principle (net of $179 income taxes) -- -- 286 -- ---------- ---------- ---------- ---------- Net income (loss) $ 7,318 $ (33,256) $ 12,109 $ (24,646) ========== ========== ========== ========== Weighted average number of common and common equivalent shares outstanding-diluted 33,250 34,797 33,259 34,912 ========== ========== ========== ========== Basic earnings (loss) per share $ 0.22 $ (0.96) $ 0.36 $ (0.71) ========== ========== ========== ========== Diluted earnings (loss) per share $ 0.22 $ (0.96) $ 0.36 $ (0.71) ========== ========== ========== ========== Cash dividends per common share $ 0.075 $ 0.075 $ 0.15 $ 0.15 ========== ========== ========== ==========
See accompanying notes 1 4 ROCK-TENN COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
March 31, September 30, 2001 2000 - ----------------------------------------------------------------------------------------------------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,075 $ 5,449 Accounts receivable (net of allowances of $4,125 and $3,732) 155,359 156,155 Inventories 97,685 99,589 Other current assets 6,830 8,050 ------------ ------------ TOTAL CURRENT ASSETS 262,949 269,243 Property, plant and equipment, at cost: Land and buildings 205,123 200,444 Machinery and equipment 875,517 855,714 Transportation equipment 12,544 13,222 Leasehold improvements 8,702 8,561 ------------ ------------ 1,101,886 1,077,941 Less accumulated depreciation and amortization (511,389) (485,403) ------------ ------------ Net property, plant and equipment 590,497 592,538 Goodwill, net 263,949 268,526 Other assets 34,966 28,656 ------------ ------------ $ 1,152,361 $ 1,158,963 ============ ============ - ----------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 77,459 $ 77,852 Accrued compensation and benefits 31,329 35,403 Current maturities of debt 115,338 20,328 Other current liabilities 30,280 26,792 ------------ ------------ TOTAL CURRENT LIABILITIES 254,406 160,375 Long-term debt due after one year 407,827 514,492 Deferred income taxes 82,712 81,384 Other long-term items 20,455 16,409 Shareholders' equity: Preferred stock, $.01 par value; 50,000,000 shares authorized; no shares outstanding at March 31 and September 30 -- -- Class A common stock, $.01 par value; 175,000,000 shares authorized, 22,476,567 and 22,031,024 outstanding at March 31 and September 30, respectively; Class B common stock, $.01 par value; 60,000,000 shares authorized; 10,777,131 and 11,352,739 outstanding at March 31 and September 30, respectively 333 334 Capital in excess of par value 127,645 127,682 Retained earnings 268,713 262,872 Accumulated other comprehensive loss (9,730) (4,585) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 386,961 386,303 ------------ ------------ $ 1,152,361 $ 1,158,963 ============ ============
See accompanying notes 2 5 ROCK-TENN COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Six Months Ended March 31, March 31, 2001 2000 - --------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income (loss) $ 12,109 $ (24,646) Items in income (loss) not affecting cash: Depreciation and amortization 38,264 38,453 Deferred income taxes 1,328 (9,192) Gain on disposal of property, plant and equipment (209) (473) Minority interest in income of consolidated subsidiary 1,524 2,435 Impairment loss and other non-cash charges 310 49,719 Change in operating assets and liabilities: Accounts receivable 317 (6,092) Inventories 1,310 (6,997) Other assets 2,636 (2,660) Accounts payable (183) (4,395) Accrued and other liabilities 1,342 (6,676) ---------- ---------- 5,422 (26,820) ---------- ---------- CASH PROVIDED BY OPERATING ACTIVITIES 58,748 29,476 INVESTING ACTIVITIES: Capital expenditures (34,147) (46,301) Proceeds from sale of property, plant and equipment 456 123 Decrease (increase) in unexpended industrial revenue bond proceeds 261 (3,247) Cash contributed to joint venture (7,532) -- ---------- ---------- CASH USED FOR INVESTING ACTIVITIES (40,962) (49,425) FINANCING ACTIVITIES: Net (repayments) additions to revolving credit facilities (104,000) 24,911 Additions to debt 110,713 5,457 Repayments of debt (18,367) (602) Debt issuance costs (189) (104) Sales of common stock 1,015 2,164 Purchases of common stock (2,324) (6,564) Cash dividends paid to shareholders (4,997) (5,247) Distribution to minority interest (2,100) (1,575) ---------- ---------- CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (20,249) 18,440 Effect of exchange rate changes on cash 89 34 ---------- ---------- Decrease in cash and cash equivalents (2,374) (1,475) Cash and cash equivalents at beginning of period 5,449 4,538 ---------- ---------- Cash and cash equivalents at end of period $ 3,075 $ 3,063 ========== ========== Supplemental disclosure of cash flow information: Cash paid during the period for: Income taxes (net of refunds) $ 5,171 $ 14,676 Interest (net of amounts capitalized) 14,513 16,907
See accompanying notes 3 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. INTERIM FINANCIAL STATEMENTS The accompanying condensed consolidated financial statements of Rock-Tenn Company and its subsidiaries (the "Company") have not been audited by independent auditors. The condensed consolidated balance sheet at September 30, 2000 has been derived from the audited consolidated financial statements. In the opinion of the Company's management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results of operations for the three month and six month periods ended March 31, 2001 and 2000, the Company's financial position at March 31, 2001 and September 30, 2000, and the cash flows for the six month periods ended March 31, 2001 and 2000. Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000. The results for the three months and six months ended March 31, 2001 are not necessarily indicative of results that may be expected for the full year. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. NOTE 2. ACCOUNTING POLICIES The Company enters into a variety of derivative transactions. Generally, the Company designates at inception that derivatives hedge risks associated with specific assets, liabilities or future commitments and monitors each derivative to determine if it remains an effective hedge. The effectiveness of the derivative as a hedge is based on a high correlation between changes in its value and changes in the value of the underlying hedged item. The Company includes in operations amounts received or paid when the underlying transaction settles. As of March 31, 2001, derivatives are included in other long-term liabilities on the balance sheet. The Company does not enter into or hold derivatives for trading or speculative purposes. From time to time, the Company uses interest rate cap agreements and interest rate swap agreements to manage synthetically the interest rate characteristics of a portion of its outstanding debt and to limit the Company's exposure to rising interest rates. Amounts to be received or paid as a result of interest rate cap agreements and interest rate swap agreements are accrued and recognized as an adjustment to interest expense related to the designated debt. The cost of purchasing interest rate caps are amortized to interest expense ratably during the life of the agreement. Gains or losses on terminations of interest rate swap agreements are deferred and amortized as an adjustment to interest expense related to the debt over the remaining term of the original contract life of terminated swap agreements. In the event of the early extinguishment of a designated debt obligation, any realized or unrealized gain or loss from the swap would be recognized in income at the time of extinguishment. From time to time, the Company uses forward contracts to limit exposure to fluctuations in Canadian foreign currency rates with respect to its receivables denominated in Canadian dollars. The forward contracts are settled monthly and resulting gains or losses are recognized at the time of settlement. The Company uses commodity swap agreements to limit the Company's exposure to falling sales prices and rising raw material costs for a portion of its recycled corrugating medium business. Amounts to be received or paid as a result of these swap agreements are recognized in the period in which the related sale is made. 4 7 NOTE 3. COMPREHENSIVE INCOME (LOSS) Total comprehensive income for the three and six months ended March 31, 2001 was $5.7 million and $7.0 million, respectively. Total comprehensive loss for the three and six months ended March 31, 2000 was $33.1 million and $23.8 million, respectively. The difference between total comprehensive income and net income was due to foreign currency translation adjustments and adjustments to the fair value of derivative instruments resulting from the adoption of Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities" (See Note 9: New Accounting Standards), as detailed below (in thousands):
Three Months Ended: Six Months Ended: March 31, March 31, March 31, March 31, 2001 2000 2001 2000 --------- --------- --------- --------- Net income (loss) $ 7,318 $ (33,256) $ 12,109 $ (24,646) Foreign currency translation (3,212) 150 (3,473) 862 Unrealized gain (loss) on derivative instruments 1,571 -- (1,673) -- --------- --------- --------- --------- Total other comprehensive (loss) income (1,641) 150 (5,146) 862 --------- --------- --------- --------- Comprehensive income (loss) $ 5,677 $ (33,106) $ 6,963 $ (23,784) ========= ========= ========= =========
NOTE 4. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results will differ from those estimates and the differences could be material. NOTE 5. INVENTORIES Substantially all U.S. inventories are stated at the lower of cost or market, with cost determined on the last-in, first-out (LIFO) basis. All other inventories are valued at lower of cost or market, with cost determined using methods which approximate cost computed on a first-in, first-out (FIFO) basis. An actual valuation of inventory under the LIFO method can only be made at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO estimates must necessarily be based on management's projection of expected year-end inventory levels and costs. Because these are subject to many factors beyond management's control, interim results are subject to the final year-end LIFO inventory valuation. Inventories at March 31, 2001 and September 30, 2000 were as follows (in thousands):
March 31, September 30, 2001 2000 ---------- ------------- Finished goods and work in process $ 74,332 $ 74,422 Raw materials 38,776 40,353 Supplies 11,671 12,159 ---------- ---------- Inventories at first-in, first-out (FIFO) cost 124,779 126,934 LIFO reserve (27,094) (27,345) ---------- ---------- Net inventories $ 97,685 $ 99,589 ========== ==========
5 8 NOTE 6. PLANT CLOSING AND OTHER COSTS During the second quarter of fiscal 2001, the Company decided to consolidate the folding carton operations of its Augusta, Georgia folding carton plant into two other plants over a period of four to six months. The closing resulted in the termination of approximately 125 employees. As a result of this decision, the Company incurred pre-tax charges of approximately $1.0 million and made severance payments of approximately $0.1 million, during the three and six month periods ended March 31, 2001. The Company expects to incur pre-tax charges aggregating approximately $4.7 million for the remainder of fiscal 2001 consisting primarily of severance, machinery relocation, asset write-downs and other one-time costs in connection with the closing of the Augusta plant. During fiscal 2000, the Company closed a laminated paperboard products plant in Lynchburg, Virginia, and folding carton plants in Chicago, Illinois, Norcross, Georgia and Madison, Wisconsin. The closures resulted in the termination of approximately 550 employees. In connection with these closings, the Company made severance and other payments of $0.6 and $1.9 million for the three and six months ended March 31, 2001, respectively, and made an adjustment to reduce the liability by $0.1 million during the first quarter of fiscal 2001. The Company had a remaining liability of approximately $0.5 million at March 31, 2001. The Company has consolidated the operations of these closed plants into other existing facilities. NOTE 7. LONG-TERM DEBT On November 14, 2000, the Company entered into a $125 million receivables-backed financing transaction (the "Receivables Financing Facility"), the proceeds of which were used to repay borrowings outstanding under its revolving credit agreement. The Receivables Financing Facility was provided by Blue Ridge Asset Funding Corporation, a commercial paper issuer administered by Wachovia Bank, N.A., with a back-up liquidity facility provided by Wachovia Bank, N.A. Both the Receivables Financing Facility and the back-up liquidity facility are 364-day vehicles. During the second quarter of fiscal 2001, the Company amended its bank Revolving Credit and Term Loan Agreement. The amendment revised the financial covenants to exclude from earnings the cash costs of certain plant closings and reduced the amount of available borrowing capacity from $450 million to $400 million. The amendment did not change the interest rate for borrowings under the credit agreement. As of March 31, 2001, the Company was in compliance with all covenants stipulated in its revolving credit agreement. NOTE 8. INCOME TAXES The differences between the statutory federal income tax rate and the Company's effective income tax rate are as follows:
Three Months Ended Six Months Ended March 31, March 31, March 31, March 31, 2001 2000 2001 2000 - -------------------------------------------------------------------------------------------------------- Statutory federal tax rate 35.0% 35.0% 35.0% 35.0% State taxes, net of federal benefit 3.6 3.4 3.6 3.3 Non-deductible amortization and write-off of goodwill 4.5 (28.4) 5.4 (52.2) Other, net (primarily non-taxable items) 1.7 (0.5) 2.1 (1.8) - -------------------------------------------------------------------------------------------------------- Effective tax rate 44.8% 9.5% 46.1% (15.7)% - --------------------------------------------------------------------------------------------------------
6 9 NOTE 9. NEW ACCOUNTING STANDARDS On October 1, 2000, the Company adopted Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," as amended. This statement requires that the fair value of derivatives be recorded as assets or liabilities. Gains or losses resulting from changes in the fair value of derivatives would be accounted for currently in earnings or comprehensive income, depending on the purpose of the derivatives and whether they qualify for hedge accounting treatment. The adoption of SFAS 133 impacts the accounting for the Company's OCC and medium hedges. The Company's results of operations can be significantly impacted by fluctuations in the price of its raw materials, especially OCC and corrugating medium. To manage the risks associated with changes in prices, the Company uses hedge contracts, which have maturities of up to 36 months. Upon the adoption of SFAS 133, the Company recorded the fair market value of its OCC and medium hedges on the consolidated balance sheet. On an ongoing basis, the Company will adjust the balance sheet to reflect the current fair market value of its hedge contracts. The related gains or losses on these contracts are deferred in shareholders' equity as a component of comprehensive income. These deferred gains and losses are recognized in income in the period in which the related OCC/medium purchases are consumed and recognized in expense. However, to the extent that the change in the value of the OCC/medium hedge contract does not perfectly offset the change in the value of the purchase being hedged, that ineffective portion of the hedge is immediately recognized in income. 7 10 NOTE 10. EARNINGS (LOSS) PER SHARE The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share data):
Three Months Ended Six Months Ended March 31, March 31, March 31, March 31, 2001 2000 2001 2000 - -------------------------------------------------------------------------------------------------------------------------------- Numerator: Income (loss) before cumulative effect of a change in accounting principle $ 7,318 $ (33,256) $ 11,823 $ (24,646) Cumulative effect of a change in accounting principle, net of tax -- -- 286 -- ------- ---------- ---------- ---------- Net income (loss) available to common shareholders $ 7,318 $ (33,256) $ 12,109 $ (24,646) ======= ========== ========== ========== Denominator: Denominator for basic earnings (loss) per share - weighted average shares 33,222 34,797 33,231 34,912 Effect of dilutive stock options 28 -- 28 -- ------- ---------- ---------- ---------- Denominator for diluted earnings (loss) per share - weighted average shares and assumed conversions 33,250 34,797 33,259 34,912 ======= ========== ========== ========== Basic earnings (loss) per share Income (loss) before cumulative effect of a change in accounting principle $ 0.22 $ (0.96) $ 0.35 $ (0.71) Cumulative effect of a change in accounting principle -- -- 0.01 -- ------- ---------- ---------- ---------- Net income (loss) per share-basic $ 0.22 $ (0.96) $ 0.36 $ (0.71) ======= ========== ========== ========== Diluted earnings (loss) per share Income (loss) before cumulative effect of a change in accounting principle $ 0.22 $ (0.96) $ 0.35 $ (0.71) Cumulative effect of a change in accounting principle -- -- 0.01 -- ------- ---------- ---------- ---------- Net income (loss) per share-diluted $ 0.22 $ (0.96) $ 0.36 $ (0.71) ======= ========== ========== ==========
Common stock equivalents were anti-dilutive and therefore excluded from the calculation of weighted average shares used in computing diluted loss per share for the three months and six months ended March 31, 2000. 8 11 NOTE 11. SEGMENT INFORMATION The following table sets forth business segment information (in thousands):
Three Months Ended Six Months Ended March 31, March 31, March 31, March 31, 2001 2000 2001 2000 - -------------------------------------------------------------------------------------------------------------------------------- Net sales (aggregate): Packaging Products $ 206,918 $ 195,083 $ 402,493 $ 388,006 Paperboard 133,158 154,714 264,613 299,038 Specialty Corrugated Packaging and Display 65,778 59,192 123,608 111,517 - -------------------------------------------------------------------------------------------------------------------------------- Total $ 405,854 $ 408,989 $ 790,714 $ 798,561 - -------------------------------------------------------------------------------------------------------------------------------- Less net sales (intersegment): Packaging Products $ 946 $ 643 $ 1,679 $ 1,664 Paperboard 35,949 37,072 73,590 77,583 Specialty Corrugated Packaging and Display 1,549 1,334 2,866 2,553 - -------------------------------------------------------------------------------------------------------------------------------- Total $ 38,444 $ 39,049 $ 78,135 $ 81,800 - -------------------------------------------------------------------------------------------------------------------------------- Net sales (unaffiliated customers): Packaging Products $ 205,972 $ 194,440 $ 400,814 $ 386,342 Paperboard 97,209 117,642 191,023 221,455 Specialty Corrugated Packaging and Display 64,229 57,858 120,742 108,964 - -------------------------------------------------------------------------------------------------------------------------------- Total $ 367,410 $ 369,940 $ 712,579 $ 716,761 - -------------------------------------------------------------------------------------------------------------------------------- Segment income: Packaging Products $ 10,040 $ 7,684 $ 19,335 $ 14,019 Paperboard 8,852 14,690 17,960 30,162 Specialty Corrugated Packaging and Display 7,831 7,793 10,134 14,041 - -------------------------------------------------------------------------------------------------------------------------------- 26,723 30,167 47,429 58,222 LIFO and intercompany profit 500 (1,465) 250 (2,665) Plant closing and other costs (3,175) (52,725) (5,040) (55,199) Other non-allocated expenses (734) (3,070) (85) (2,954) Interest and other income 101 83 297 188 Interest expense (9,370) (8,465) (19,394) (16,459) Minority interest in income of consolidated subsidiary (777) (1,274) (1,524) (2,435) - -------------------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes $ 13,268 $ (36,749) $ 21,933 $ (21,302) - --------------------------------------------------------------------------------------------------------------------------------
9 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto, included herein, and our audited consolidated financial statements and notes thereto for the fiscal year ended September 30, 2000 which have been filed with the Securities and Exchange Commission as part of our Annual Report on Form 10-K. SEGMENT AND MARKET INFORMATION We report our results in three industry segments: (1) packaging products, (2) paperboard and (3) specialty corrugated packaging and display. No customer accounts for more than 5% of our consolidated net sales. The packaging products segment consists of facilities that produce folding cartons, solid fiber partitions and thermoformed plastic products. We compete with a significant number of national, regional and local packaging suppliers. During fiscal 2000, we sold packaging products to approximately 3,200 customers. We sell packaging products to several large national customers; however, the majority of our packaging products sales are to smaller national and regional customers. The packaging business is highly competitive. As a result, we regularly bid for sales opportunities to customers for business or for renewal of existing business. The loss of business or the award of new business from our larger customers may have a significant impact on our results of operations. The paperboard segment consists of facilities that collect recovered paper and that manufacture 100% recycled clay-coated and specialty paperboard, which we refer to as boxboard; corrugating medium, which we refer to as medium; and laminated paperboard products. In our clay-coated and specialty paperboard divisions, we compete with integrated and non-integrated national, regional and local companies manufacturing various grades of paperboard. In our laminated paperboard products division, we compete with a small number of national, regional and local companies offering highly specialized products. We also compete with foreign companies in the book cover market. Our recycled fiber division competes with national, regional and local companies. During fiscal 2000, we sold boxboard, corrugating medium, laminated paperboard products and recovered paper to approximately 1,800 customers. A significant percentage of our sales of boxboard is made to our packaging products and specialty corrugated packaging and display segments and to our laminated paperboard products division. Our paperboard segment's sales volumes may therefore be directly impacted by changes in demand for our packaging and laminated paperboard products. The specialty corrugated packaging and display segment consists of facilities that produce corrugated containers and displays. We compete with a number of national, regional and local suppliers of those goods in this segment. During fiscal 2000, we sold corrugated containers and display products to approximately 1,100 customers. Due to the highly competitive nature of the specialty packaging and display business, we regularly bid for sales opportunities to customers for new business or for renewal of existing business. The loss of business or the award of new business from our larger customers may have a significant impact on our results of operations. The following table shows certain operating data for our three industry segments. Certain of our income and expenses are not allocated to our segments and are thus not reflected in the information used by management to make operating decisions and assess performance at the plant level. These items are reported as non-allocated expenses. These include adjustments to record inventory on the last-in, first-out, or "LIFO", method compared to the first-in, first-out, "FIFO", method, elimination of intercompany profit, plant closing and related expenses and certain corporate expenses. 10 13 ROCK-TENN COMPANY INDUSTRY SEGMENT INFORMATION (UNAUDITED) (IN THOUSANDS EXCEPT FOR TONNAGE DATA)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED March 31, March 31, March 31, March 31, 2001 2000 2001 2000 -------- -------- ------ ------ NET SALES: Packaging Products Segment $206,918 $195,083 $402,493 $388,006 Paperboard Segment 133,158 154,714 264,613 299,038 Specialty Corrugated Packaging and Display Segment 65,778 59,192 123,608 111,517 Intersegment Eliminations (38,444) (39,049) (78,135) (81,800) - -------------------------------------------------------------------------------------------------------------- TOTAL $367,410 $369,940 $712,579 $716,761 - -------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE INCOME TAXES: Packaging Products Segment $10,040 $ 7,684 $19,335 $ 14,019 Paperboard Segment 8,852 14,690 17,960 30,162 Specialty Corrugated Packaging and Display Segment 7,831 7,793 10,134 14,041 - -------------------------------------------------------------------------------------------------------------- Segment Income 26,723 30,167 47,429 58,222 LIFO and Intercompany Profit 500 (1,465) 250 (2,665) Plant Closing and Other Costs (3,175) (52,725) (5,040) (55,199) Other Non-Allocated Expenses (734) (3,070) (85) (2,954) Interest and Other Income 101 83 297 188 Interest Expense (9,370) (8,465) (19,394) (16,459) Minority Interest in Income of Consolidated Subsidiary (777) (1,274) (1,524) (2,435) - -------------------------------------------------------------------------------------------------------------- TOTAL $ 13,268 $(36,749) $21,933 $(21,302) Paperboard Shipped (in tons) 262,183 301,802 520,347 594,527 ==============================================================================================================
RESULTS OF OPERATIONS Net Sales (Unaffiliated Customers) Net sales for the quarter ended March 31, 2001 decreased 0.7% to $367.4 million from $369.9 million for the quarter ended March 31, 2000. Net sales for the six months ended March 31, 2001 decreased 0.6% to $712.6 million from $716.8 million for the six months ended March 31, 2000. Net sales decreased primarily as a result of weak market conditions in our paperboard businesses. Net Sales (Aggregate) - Packaging Products Segment
First Second Six Months Third Fourth Fiscal (In Millions) Quarter Quarter Ended 3/31 Quarter Quarter Year ------------------------------------------------------------------------------------------------------------------ 2000 $192.9 $195.1 $388.0 $202.8 $206.6 $797.4 2001 195.6 206.9 402.5 -- --- -- ------------------------------------------------------------------------------------------------------------------
11 14 Net sales of packaging products before intersegment eliminations for the quarter ended March 31, 2001 increased 6.0% to $206.9 million from $195.1 million for the quarter ended March 31, 2000. Net sales of packaging products before intersegment eliminations for the six months ended March 31, 2001 increased 3.7% to $402.5 million from $388.0 million for the six months ended March 31, 2000. The increase was a result of firmer market conditions in our folding carton business and increases in volume and selling prices in our plastic packaging division offset by a decline in sales volume at our partition joint venture, RTS packaging. Net Sales (Aggregate) - Paperboard Segment
First Second Six Months Third Fourth Fiscal (In Millions) Quarter Quarter Ended 3/31 Quarter Quarter Year --------------------------------------------------------------------------------------------------------------- 2000 $144.3 $154.7 $299.0 $148.9 $140.6 $588.5 2001 131.5 133.1 264.6 -- -- -- ---------------------------------------------------------------------------------------------------------------
Net sales of paperboard before intersegment eliminations for the quarter ended March 31, 2001 decreased 14.0% to $133.1 million from $154.7 million for the quarter ended March 31, 2000. Net sales of paperboard before intersegment eliminations for the six months ended March 31, 2001 decreased 11.5% to $264.6 million from $299.0 million for the six months ended March 31, 2000. The decrease was primarily due to a decrease in demand for our products by customers in the book and ready to assemble furniture industries, adversely affecting volumes in our laminated paperboard products and specialty paperboard divisions. Reduced sales volumes at our RTS packaging division also contributed to the decline in sales in our specialty paperboard division. The reduction in sales to RTS resulted primarily from an increase in tons sold to RTS by the other partner in the venture, who did not exercise their contractual right to sell paperboard to the venture during the first half of fiscal 2000. Net Sales (Aggregate) - Specialty Corrugated Packaging and Display Segment
First Second Six Months Third Fourth Fiscal (In Millions) Quarter Quarter Ended 3/31 Quarter Quarter Year --------------------------------------------------------------------------------------------------------------- 2000 $ 52.3 $ 59.2 $111.5 $ 59.1 $ 68.2 $238.8 2001 57.8 65.8 123.6 -- -- -- ---------------------------------------------------------------------------------------------------------------
Net sales within this segment before intersegment eliminations for the quarter ended March 31, 2001 increased 11.1% to $65.8 million from $59.2 million for the quarter ended March 31, 2000. Net sales within this segment before intersegment eliminations for the six months ended March 31, 2001 increased 10.9% to $123.6 million from $111.5 million for the six months ended March 31, 2000. The increase primarily resulted from increased selling prices in the Alliance division offset by lower volumes in our corrugated packaging business due to generally weaker market conditions. Cost of Goods Sold Cost of goods sold for the quarter ended March 31, 2001 decreased 0.9% to $293.6 million from $296.3 million for the quarter ended March 31, 2000. Cost of goods sold as a percentage of net sales for the quarter ended March 31, 2001 decreased to 79.9% from 80.1% for the quarter ended March 31, 2000. Cost of goods sold for the six months ended March 31, 2001 increased 0.3% to $572.8 million from $570.9 million for the six months ended March 31, 2000. Cost of goods sold as a percentage of net sales for the six months ended March 31, 2001 increased to 80.4% from 79.7% for the six months ended March 31, 2000. Cost of goods sold as a percentage of net sales was higher during the second quarter of last fiscal year due to (1) operating inefficiencies at several plants related in part to the start-up of certain new equipment, (2) a $1.0 million charge representing estimated losses expected to be incurred under a customer contract and (3) a $0.3 million charge resulting from our decision to remove from service certain equipment. Cost of goods sold as a percentage of net sales increased for the six months ended March 31, 2001 primarily due to increases in natural gas prices over the same period last year. 12 15 Substantially all of our U.S. inventories are valued at the lower of cost or market with cost determined on the last-in, first-out (LIFO) inventory valuation method, which we believe generally results in a better matching of current costs and revenues than under the first-in, first-out (FIFO) inventory valuation method. In periods of decreasing costs, the LIFO method generally results in lower cost of goods sold than under the FIFO method. In periods of increasing costs, the results are generally the opposite. Our quarterly results of operations reflect LIFO estimates based on management's projection of expected year-end inventory levels and costs. Because these estimates are subject to many factors beyond management's control, interim results are subject to the final year-end LIFO inventory valuation. The following table illustrates the comparative effect of LIFO and FIFO accounting on our results of operations. These supplemental FIFO earnings reflect the after-tax effect of eliminating the LIFO adjustment each year.
Three months ended March 31, Six months ended March 31, 2001 2000 2001 2000 --------------- -------------- --------------- -------------- (In Millions) LIFO FIFO LIFO FIFO LIFO FIFO LIFO FIFO ---------------------------------------------------------------------------------------------------------------- Cost of goods sold $293.6 $294.1 $296.3 $294.8 $572.8 $573.1 $570.9 $568.3 Net income 7.3 7.0 (33.3) (32.4) 12.1 11.9 (24.6) (23.0) ---------------------------------------------------------------------------------------------------------------- Gross Profit First Second Six Months Third Fourth Fiscal (% of Net Sales) Quarter Quarter Ended 3/31 Quarter Quarter Year ------------------------------------------------------------------------------------------------------------------ 2000 20.8% 19.9% 20.3% 18.8% 19.4% 19.7% 2001 19.1% 20.1% 19.6% -- -- -- ------------------------------------------------------------------------------------------------------------------
Gross profit for the quarter ended March 31, 2001 increased 0.3% to $73.8 million from $73.6 million for the quarter ended March 31, 2000. Gross profit for the six months ended March 31, 2001 decreased 4.1% to $139.8 million from $145.8 million for the six months ended March 31, 2000. Gross profit as a percentage of net sales was 20.1% and 19.9% for the quarters ended March 31, 2001 and 2000, respectively. Gross profit as a percentage of net sales was 19.6% and 20.3% for the six months ended March 31, 2001 and 2000, respectively. See Cost of Goods Sold. Selling, General and Administrative Expenses Selling, general and administrative expenses for the quarter ended March 31, 2001 decreased 0.9% to $45.2 million from $45.6 million for the quarter ended March 31, 2000. Selling, general and administrative expenses for the six months ended March 31, 2001 decreased 0.7% to $87.9 million from $88.5 million for the six months ended March 31, 2000. Selling, general and administrative expenses as a percentage of net sales remained steady at 12.3% for the three months and six months ended March 31, 2001 and March 31, 2000. Plant Closing and Other Costs During the second quarter of fiscal 2001, we decided to consolidate the folding carton operations of our Augusta, Georgia folding carton plant into two other plants over a period of four to six months. This closing resulted in the termination of approximately 125 employees. As a result of this decision, we incurred pre-tax charges of approximately $1.0 million and made severance payments of approximately $0.1 million during the three and six month periods ended March 31, 2001. We expect to incur pre-tax charges aggregating approximately $4.7 million for the remainder of fiscal 2001 consisting primarily of severance, machinery relocation, asset write downs and other one-time costs in connection with the closing of the Augusta plant. 13 16 During fiscal 2000, we closed a laminated paperboard products plant in Lynchburg, Virginia, and folding carton plants in Chicago, Illinois, Norcross, Georgia and Madison, Wisconsin. The closures resulted in the termination of approximately 550 employees. In connection with these closings, we made severance and other payments of $0.6 million and $1.9 million for the three and six months ended March 31, 2001, respectively, and made an adjustment to reduce the liability by $0.1 million during the first quarter of fiscal 2001. We had a remaining liability of approximately $0.5 million at March 31, 2001. We have consolidated the operations of these closed plants into other existing facilities. Segment Operating Income. Operating Income - Packaging Products Segment
Net Sales Operating (In Millions, except Percentages) (Aggregate) Income Return on Sales - ------------------------------------------------------------------------------------------------------------------ First Quarter $ 192.9 $ 6.3 3.3% Second Quarter 195.1 7.7 3.9 ------ ----- Six Months Ended 3/31 388.0 14.0 3.6 Third Quarter 202.8 10.7 5.3 Fourth Quarter 206.6 10.1 4.9 - ----------------------------------------------------------------------------------------------------------------- Fiscal 2000 $ 797.4 $ 34.8 4.4% ================================================================================================================= FIRST QUARTER $ 195.6 $ 9.3 4.8% SECOND QUARTER 206.9 10.0 4.8 ------- ----- ----- SIX MONTHS ENDED 3/31 402.5 19.3 4.8 THIRD QUARTER -- -- -- FOURTH QUARTER -- -- -- - ------------------------------------ -------------------------- -------------------------- ----------------------- FISCAL 2001 -- -- -- ==================================================================================================================
Operating income attributable to the packaging products segment for the quarter ended March 31, 2001 increased 29.9% to $10.0 million from $7.7 million for the quarter ended March 31, 2000. Operating income attributable to the packaging products segment for the six months ended March 31, 2001 increased 37.9% to $19.3 million from $14.0 million for the six months ended March 31, 2000. Operating margin for the quarter ended March 31, 2001 was 4.8% compared to 3.9% for the quarter ended March 31, 2000. Operating margin for the six months ended March 31, 2001 was 4.8% compared to 3.6% for the six months ended March 31, 2000. The increase in operating margin was primarily the result of operating efficiencies in our folding carton division gained through plant consolidations in fiscal 2000. Also contributing to the increase in operating margin was a net sales increase of nearly 50% in our plastic packaging business, which resulted in a corresponding increase in operating income. 14 17 Operating Income - Paperboard Segment
Net Sales Operating (In Millions, except Percentages) (Aggregate) Income Return on Sales - ------------------------------------------------------------------------------------------------------------------ First Quarter $ 144.3 $ 15.5 10.7% Second Quarter 154.7 14.7 9.5 ------- ------ ----- Six Months Ended 3/31 299.0 30.2 10.1 Third Quarter 148.9 8.4 5.6 Fourth Quarter 140.6 9.0 6.4 - ----------------------------------------------------------------------------------------------------------------- Fiscal 2000 $ 588.5 $47.6 8.1% ================================================================================================================= FIRST QUARTER $ 131.5 $ 9.1 6.9% SECOND QUARTER 133.1 8.9 6.7 ------- ----- ------ SIX MONTHS ENDED 3/31 264.6 18.0 6.8 THIRD QUARTER -- -- -- FOURTH QUARTER -- -- -- - ----------------------------------------------------------------------------------------------------------------- FISCAL 2001 -- -- -- =================================================================================================================
Operating income attributable to the paperboard segment for the quarter ended March 31, 2001 decreased 39.5% to $8.9 million from $14.7 million for the quarter ended March 31, 2000. Operating income attributable to the paperboard segment for the six months ended March 31, 2001 decreased 40.4% to $18.0 million from $30.2 million for the six months ended March 31, 2000. Operating margin for the quarter ended March 31, 2001 was 6.7% compared to 9.5% for the quarter ended March 31, 2000. Operating margin for the six months ended March 31, 2001 was 6.8% compared to 10.1% for the six months ended March 31, 2000. The decrease in operating margin resulted from higher energy costs and softer markets. Sales of our laminated paperboard products declined due to a decrease in demand by customers in the book and ready to assemble furniture industries. In turn, the reduced sales volumes at our laminated paperboard products division, combined with a decline in sales to our RTS packaging division, reduced operating income in our specialty paperboard division. The decreases in operating margin of our mills were partially offset by lower recovered fiber prices. However, this decline in recovered fiber prices reduced operating margin of our recycled fiber division, further contributing to the decrease in operating margin of our paperboard segment.
Weighted Uncoated Coated Average Medium Average Total Average Average Tons Tons Boxboard Tons Medium Tons Price Recovered Shipped Shipped Price Shipped Price Shipped All Tons Paper Cost (In Thousands) (In (Per (In (Per Ton) (In (Per Ton) (Per Ton) Thousands) Ton) Thousands) Thousands) ------------------------------------------------------------------------------------------------------------------- First Quarter 127.3 123.1 $420 42.4 $386 292.8 $415 $83 Second Quarter 129.5 127.6 426 44.7 403 301.8 423 91 ----- ----- ---- ----- Six Months Ended 3/31 256.8 250.7 423 87.1 395 594.6 419 87 Third Quarter 123.4 118.6 445 40.9 419 282.9 441 108 Fourth Quarter 110.6 118.1 449 42.2 407 270.9 443 88 ------------------------------------------------------------------------------------------------------------------- Fiscal 2000 490.8 487.4 $435 170.2 $403 1,148.4 $430 $92 =================================================================================================================== FIRST QUARTER 97.9 118.8 $451 41.5 $393 258.2 $442 $65 SECOND QUARTER 102.8 119.6 445 39.8 385 262.2 435 58 ----- ----- ---- ----- SIX MONTHS ENDED 3/31 200.7 238.4 448 81.3 389 520.4 439 62 THIRD QUARTER -- -- -- -- -- -- -- -- FOURTH QUARTER -- -- -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------- FISCAL 2001 -- -- -- -- -- -- -- -- ===================================================================================================================
Total operating capacity in our paperboard segment for the three months ended March 31, 2001 declined 5.1% to 307.6 thousand tons from 324.2 thousand tons for the three months ended March 31, 2000. Total operating capacity in our paperboard segment for the six months ended March 31, 2001 declined 5.6% to 612.0 thousand tons from 648.4 thousand tons for the six months ended March 31, 2000. The decrease in operating capacity is due to the contribution of one of our two paperboard machines at our Lynchburg, Virginia paperboard mill to Seven 15 18 Hills Paperboard, LLC, an entity in which we own 49%. The machine is being converted to manufacture gypsum wallboard facing paper. Our St. Paul, Minnesota, Battle Creek, Michigan, Sheldon Springs, Vermont, Dallas, Texas, and Stroudsburg, Pennsylvania mills produce coated grades of paperboard. Total annual capacity of coated paperboard is 545.0 thousand tons. Our Chattanooga, Tennessee, Otsego, Michigan, Dallas, Texas, Lynchburg, Virginia, Eaton, Indiana, Cincinnati, Ohio, and Aurora, Illinois mills produce uncoated grades of paperboard. Total annual capacity of uncoated paperboard is 504.0 thousand tons. Our St. Paul, Minnesota facility produces recycled corrugating medium and has an annual capacity of 185.0 thousand tons. Operating Income - Specialty Corrugated Packaging and Display Segment
Net Sales Operating Return (In Millions, except percentages (Aggregate) Income on Sales ------------------------------------------------------------------------------------------------------------------ First Quarter $ 52.3 $6.2 11.9% Second Quarter 59.2 7.8 13.2 ----- ---- ---- Six Months Ended 3/31 111.5 14.0 12.6 Third Quarter 59.1 7.2 12.2 Fourth Quarter 68.2 7.2 10.6 --------------------------------------------------------------------------------------------------------------- Fiscal 2000 $ 238.8 $28.4 11.9% ================================================================================================================ FIRST QUARTER $57.8 $2.3 4.0% SECOND QUARTER 65.8 7.8 11.9 ----- ---- ---- SIX MONTHS ENDED 3/31 123.6 10.1 8.2 THIRD QUARTER -- -- -- FOURTH QUARTER -- -- -- ---------------------------------------------------------------------------------------------------------------- FISCAL 2001 -- -- -- ================================================================================================================
Operating income attributable to this segment for the quarter ended March 31, 2001 was flat at $7.8 million as compared to the quarter ended March 31, 2000. Operating income attributable to this segment for the six months ended March 31, 2001 was $10.1 million as compared to $14.0 million, a decrease of 27.9%, for the six months ended March 31, 2000. Operating margin for the quarter ended March 31, 2001 decreased to 11.9% from 13.2% for the quarter ended March 31, 2000. Operating margin for the six months ended March 31, 2001 decreased to 8.2% from 12.6% for the six months ended March 31, 2000. The decrease in operating margin primarily resulted from lower sales volumes in our corrugating packaging division due to generally weaker market conditions as well as fixed costs associated with positioning the Alliance division for fiscal 2001 growth. Interest Expense Interest expense for the quarter ended March 31, 2001 increased to $9.4 million from $8.5 million for the quarter ended March 31, 2000. Interest expense for the six months ended March 31, 2001 increased to $19.4 million from $16.5 million for the six months ended March 31, 2000. The increase in interest expense for the quarter and six months ended March 31, 2001 was primarily due to an increase in our average outstanding borrowings and higher interest rates. Provision for Income Taxes The income tax expense for the quarter ended March 31, 2001 was $6.0 million compared to an income tax benefit of $3.5 million for the quarter ended March 31, 2000. Provision for income taxes increased to $10.1 million for the six months ended March 31, 2001 from $3.3 million for the six months ended March 31, 2000. The Company's effective tax expense rate was 44.8% for the quarter ended March 31, 2001 compared to an effective tax benefit rate of 9.5% for the quarter ended March 31, 2000. The Company's effective tax rate increased to 46.1% for the six months ended March 31, 2001 compared to 15.7% for the six months ended March 31, 2000. Differences between our effective tax rate and statutory rates relate primarily to the amortization and write-off of goodwill, which is not deductible for income tax purposes. 16 19 Net Income (Loss) and Earnings (Loss) Per Common and Common Equivalent Share Net income for the quarter and six months ended March 31, 2001 was $7.3 million and $12.1 million, respectively. Net loss for the quarter and six months ended March 31, 2000 was $33.3 million and $24.6 million, respectively. Net income as a percentage of net sales was 2.0% and 1.7% for the quarter and six months ended March 31, 2001, respectively. Net loss as a percentage of net sales was 9.0% and 3.4% for the quarter and six months ended March 31, 2000. Earnings per common and common equivalent share for the quarter and six months ended March 31, 2001 was $0.22 and $0.36, respectively. Loss per common and common equivalent share for the quarter and six months ended March 31, 2000 were $0.96 and $0.71, respectively. LIQUIDITY AND CAPITAL RESOURCES Working Capital and Capital Expenditures We have funded our working capital requirements and capital expenditures, including acquisitions, from net cash provided by operating activities, borrowings under term notes and bank credit facilities and proceeds received in connection with the issuance of industrial revenue bonds and debt and equity securities. During the second quarter of fiscal 2001, we amended the terms of our revolving credit facility under which we reduced our aggregate borrowing availability from $450.0 million to $400.0 million. At March 31, 2001, we had $289.0 million outstanding under our revolving credit facility. The revolving credit facility terminates in 2005. Cash and cash equivalents, $3.1 million at March 31, 2001, decreased from $5.4 million at September 30, 2000. Net cash provided by operating activities increased for the six months ended March 31, 2001 to $58.7 million from $29.5 million for the six months ended March 31, 2000. The increase was primarily a result of decreases in accounts receivable and inventory balances and increases in accrued liabilities balances. Net cash used for financing activities aggregated $20.2 million for the six months ended March 31, 2001 and consisted primarily of repayments of borrowings, purchases of common stock and dividend payments. Net cash provided by financing activities aggregated $18.4 million for the six months ended March 31, 2000 and consisted primarily of additional borrowings under the revolving credit facility, partially offset by purchases of common stock and dividend payments. Net cash used for investing activities was $41.0 million for the six months ended March 31, 2001 compared to $49.4 million for the six months ended March 31, 2000 and consisted primarily of capital expenditures for the six months ended March 31, 2001 and March 31, 2000. Capital expenditures during the six months ended March 31, 2001 aggregated $34.1 million and were used primarily to purchase and upgrade machinery and equipment. We estimate that our capital expenditures will aggregate approximately $80.0 million for fiscal 2001. These expenditures will be used to purchase and upgrade various machinery and equipment in all of our divisions and for building expansions and improvements in one of our divisions. We anticipate that we will be able to fund our capital expenditures, acquisitions, interest payments, stock repurchases, dividends and working capital needs for the foreseeable future from cash generated from operations, borrowings under our revolving credit facility, proceeds from the issuance of debt or equity securities or other additional long-term debt financing. Derivative Instruments We enter into a variety of derivative transactions. Generally, we designate at inception that derivatives hedge risks associated with specific assets, liabilities or future commitments and monitor each derivative to determine if it remains an effective hedge. The effectiveness of the derivative as a hedge is based on a high correlation between changes in its value and changes in the value of the underlying hedged item. We include in operations amounts received or paid when the underlying transaction settles. As of March 31, 2001, derivatives are included in other long-term liabilities on the balance sheet. We do not enter into or hold derivatives for trading or speculative purposes. From time to time, we use interest rate cap agreements and interest rate swap agreements to manage synthetically the interest rate characteristics of a portion of our outstanding debt and to limit our exposure to rising interest rates. Amounts to be received or paid as a result of interest rate cap agreements and interest rate swap agreements are accrued and recognized as an adjustment to interest expense related to the designated debt. The cost of purchasing interest rate caps are amortized to interest expense ratably during the life of the agreement. Gains or losses on 17 20 terminations of interest rate swap agreements are deferred and amortized as an adjustment to interest expense related to the debt over the remaining term of the original contract life of terminated swap agreements. In the event of the early extinguishment of a designated debt obligation, any realized or unrealized gain or loss from the swap would be recognized in income at the time of the extinguishment. From time to time, we use forward contracts to limit exposure to fluctuations in Canadian foreign currency rates with respect to our receivables denominated in Canadian dollars. The forward contracts are settled monthly and resulting gains or losses are recognized at the time of settlement. We use commodity swap agreements to limit our exposure to falling sales prices and rising raw material costs for a portion of our recycled corrugating medium business. Amounts to be received or paid as a result of these swap agreements are recognized in the period in which the related sale is made. 18 21 FORWARD-LOOKING STATEMENTS Statements herein regarding, among other things, estimated capital expenditures and the estimated costs of closing the Augusta facility, constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such statements are subject to certain risks and uncertainties that could cause actual amounts to differ materially from those projected. With respect to these forward-looking statements, management has made assumptions regarding, among other things, the amount and timing of expected capital expenditures as well as estimated severance costs, the timing and cost of relocating equipment and the amount of asset writedowns in connection with closing the Augusta facility. These forward-looking statements are subject to certain risks including, among others, that the foregoing assumptions are incorrect. Further, these forward-looking statements are subject to other general risks including, among others, decreases in demand for our products, increases in energy and raw material costs, fluctuations in selling prices, possible adverse actions of our customers, our competitors and suppliers and adverse changes in general market and industry conditions. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on such estimates, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. 19 22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For a discussion of certain market risks related to the Company, See the "Market Risk Sensitive Instruments and Positions" section in the Management's Discussion and Analysis of Results of Operations and Financial Condition, in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000. There have been no significant developments with respect to derivatives or exposure to market risk. 20 23 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of shareholders was held on January 26, 2001 at which several matters were submitted to a vote of the shareholders: (a) Votes cast for or withheld regarding the four individuals elected as directors of the Company for a term expiring in 2004 were as follows (there were no abstentions or broker non-votes):
FOR WITHELD --- ------- Stephen G. Anderson 106,194,097 151,621 Robert B. Currey 105,361,229 984,489 L. L. Gellerstedt III 106,181,624 164,094 John W. Spiegel 106,103,499 242,219
Votes cast for or witheld regarding the individual elected as director of the company for a term expiring in 2002 were as follows (there were no abstentions or broker non-votes):
FOR WITHELD --- ------- G. Stephen Felker 106,104,920 240,798
Additional directors, whose terms of office as directors continued after the meeting, are as follows:
Term expiring in 2002 Term expiring in 2003 --------------------- --------------------- J. Hyatt Brown Bradley Currey, Jr. A. D. Frazier* John D. Hopkins C. Randolph Sexton Lou Brown Jewell James W. Johnson James A. Rubright
*Effective March 31, 2001, Mr. Frazier resigned from the Board. (b) Votes cast for or against and the number of abstentions regarding each other matter voted upon at the meeting were as follows:
Broker Description of Matter For Against Abstain Non-Votes --------------------- --- ------- ------- --------- Approval of 2000 Incentive Stock Plan 96,391,778 5,301,901 1,648,413 3,003,626 Approval of Amendment to 1993 Employee Stock Purchase Plan 101,506,978 226,015 1,609,099 3,003,626
21 24 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10 - Amendment to Credit Agreement 10.1 - 2000 Incentive Stock Plan (incorporated by reference to the Company's definitive Proxy Statement for the 2001 Annual Meeting of shareholders filed with the SEC on December 18, 2000) 10.2 - Amendment to 1993 Employee Stock Purchase Plan (incorporated by reference to the Company's definitive Proxy Statement for the 2001 Annual Meeting of Shareholders filed with the SEC on December 18, 2000) (b) Reports on Form 8-K None 22 25 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ROCK-TENN COMPANY (Registrant) Date: May 14, 2001 By: /s/ STEVEN C. VOORHEES ---------------------- -------------------------------------- Steven C. Voorhees Executive Vice-President Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer and duly authorized officer) 23 26 ROCK-TENN COMPANY INDEX TO EXHIBITS
Page No. Exhibit 10 Amendment to Credit Agreement 25 Exhibit 10.1 2000 Incentive Stock Plan (incorporated by reference to the Company's definitive Proxy Statement for the 2001 Annual Meeting of shareholders filed with the SEC on December 18, 2000) Exhibit 10.2 Amendment to 1993 Employee Stock Purchase Plan (incorporated by reference to the Company's definitive Proxy Statement for the 2001 Annual Meeting of shareholders filed with the SEC on December 18, 2000)
24 EX-10 2 g69494ex10.txt FIRST AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 10 FIRST AMENDMENT TO CREDIT AGREEMENT This First Amendment to CREDIT Agreement dated as of April 6, 2001 (the "Amendment") by and among ROCK-TENN COMPANY, a Georgia corporation (the "Borrower"), SUNTRUST BANK, a banking corporation organized under the laws of the State of Georgia ("SunTrust"), the other banks and financial institutions listed on the signature pages hereof, (SunTrust, and such other banks, lending institutions, and assignees referred to collectively herein as the "Lenders"), SUNTRUST BANK, in its capacity as Agent for the Lenders (the "Agent"), BANK OF AMERICA, N.A., as Syndication Agent (the "Syndication Agent") and WACHOVIA BANK, N.A., as Documentation Agent (the "Documentation Agent"). WHEREAS, the Borrower, the Agent and the Lenders are parties to that certain Credit Agreement dated as of June 30, 2000, by and among the Borrower, the Agent and the other Lenders (the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), pursuant to which the Lenders have made available certain financial accommodations to the Borrower; WHEREAS, the parties wish to amend the Credit Agreement to, among other things, (i) modify the manner in which certain financial covenants are calculated, (ii) reduce the revolving credit commitment, and (iii) modify the restricted payments covenant, but only on the terms and conditions contained herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto agree as follows: Section 1. Amendments. (a) The Credit Agreement is hereby amended by deleting the definition of "Applicable Margin" from Section 1.1 and substituting in lieu thereof the following new definition of "Applicable Margin": "Applicable Margin shall mean with respect to all Revolving Loans outstanding on any date, a percentage per annum determined by reference to the applicable ratio of Total Funded Debt to EBITDA as calculated as of the end of the immediately preceding fiscal quarter determined by reference to the table set forth on Schedule 1.01(a) attached hereto; provided, however, that in determining Total Funded Debt to EBITDA for purposes of determining the Applicable Margin, the items referenced in clause (vii) of the definition of EBITDA shall be omitted. 2 Notwithstanding the foregoing, the initial Applicable Margin shall be determined as set forth in Section 4.6 hereof. Any changes to the Applicable Margin will be effective as of the date specified in Section 4.6." (b) The Credit Agreement is hereby amended by deleting the definition of "EBITDA" from Section 1.1 and substituting in lieu thereof the following new definition of "EBITDA": "EBITDA shall mean for any fiscal period, Consolidated Net Income (or Consolidated Net Loss, as the case may be) for such period plus (a) the aggregate amount deducted in determining such Consolidated Net Income (Loss) in respect of (i) Interest Expense, (ii) Income Taxes of the Consolidated Companies determined in accordance with GAAP, (iii) depreciation and amortization expense of the Consolidated Companies determined in accordance with GAAP, in each case for the applicable fiscal period, (iv) the amount of any non-cash charges relating to plant shut-downs and asset impairment charges actually taken by the Borrower for the quarter ending March 31, 2000, (v) any non-cash charges actually taken by the Consolidated Companies after March 31, 2000 which are associated with the accelerated write-off of any tangible or intangible assets related to the acquisition of Waldorf Corporation provided such amounts do not exceed $100,000,000 in the aggregate through the Maturity Date, (vi) any non-cash charges actually taken which are associated with the accelerated write-off of any tangible or intangible assets provided such amounts do not exceed $50,000,000 in the aggregate through the Maturity Date and (vii) the amount of cash charges actually taken which resulted from the Home Office and Folding Carton Division reorganizations and the closing of the Borrower's Downingtown, Pennsylvania converting facility, Norcross, Georgia folding facility, Lynchburg, Virginia converting facility, Augusta, Georgia folding facility, Madison, Wisconsin folding facility, and Chicago, Illinois folding facility in an aggregate amount not to exceed $4,832,000 for the fiscal quarter ending June 30, 2000, $5,637,000 for the fiscal quarter ending September 30, 2000, $1,906,000 for the fiscal quarter ending December 31, 2000 and an aggregate of $7,000,000 thereafter; in each case for the Consolidated Companies determined on a consolidated basis in accordance with GAAP, (b) actual rental expense associated with any Synthetic Lease and (c) cash distributions of earnings of Unrestricted Subsidiaries made to a Consolidated Company to the extent previously excluded in the -2- 3 determination of Consolidated Net Income or Consolidated Net Loss by virtue of clause (i) of the respective definitions thereof." (c) The Credit Agreement is hereby further amended by deleting the definition of "EBITR" from Section 1.1 and substituting in lieu thereof the following new definition of "EBITR": "EBITR shall mean for any fiscal period, Consolidated Net Income (or Consolidated Net Loss, as the case may be) for such period plus (a) the aggregate amount deducted in determining such Consolidated Net Income (Loss) in respect of (i) Interest Expense, (ii) Income Taxes of the Consolidated Companies determined in accordance with GAAP, (iii) 100% of lease expense (including any rental expense under any Synthetic Lease but excluding expenses incurred in respect of Capital Leases) of the Consolidated Companies determined in accordance with GAAP, in each case for the applicable fiscal period, (iv) any non-cash charges relating to plant shut-downs and asset impairment charges actually taken by the Consolidated Companies for the quarter ending March 31, 2000, (v) any non-cash charges actually taken by the Consolidated Companies after March 31, 2000 which are associated with the accelerated write-off of any tangible or intangible assets related to the acquisition of Waldorf Corporation provided such amounts do not exceed $100,000,000 in the aggregate through the Maturity Date, (vi) any non-cash charges actually taken which are associated with the accelerated write-off of any tangible or intangible assets provided such amounts do not exceed $50,000,000 in the aggregate through the Maturity Date and (vii) the amount of cash charges actually taken which resulted from the Home Office and Folding Carton Division reorganizations and the closing of the Borrower's Downingtown, Pennsylvania converting facility, Norcross, Georgia folding facility, Lynchburg, Virginia converting facility, Augusta, Georgia folding facility, Madison, Wisconsin folding facility, and Chicago, Illinois folding facility in an aggregate amount not to exceed $4,832,000 for the fiscal quarter ending June 30, 2000, $5,637,000 for the fiscal quarter ending September 30, 2000, $1,906,000 for the fiscal quarter ending December 31, 2000 and an aggregate of $7,000,000 thereafter; in each case for the Consolidated Companies determined on a consolidated basis in accordance with GAAP and (b) cash distributions of earnings of Unrestricted Subsidiaries made to a Consolidated Company to the extent previously excluded in the determination of Consolidated -3- 4 Net Income or Consolidated Net Loss by virtue of clause (i) of the respective definitions thereof." (d) The Credit Agreement is hereby further amended by deleting the definition of "Facility Fee Percentage" from Section 1.1 and substituting in lieu thereof the following new definition of "Facility Fee Percentage": "Facility Fee Percentage shall mean, with respect to the Facility Fee, as of any date, the percentage per annum determined by reference to the applicable ratio of Total Funded Debt to EBITDA as calculated as of the end of the immediately preceding fiscal quarter determined by reference to the table set forth on Schedule 1.01(a) attached hereto; provided, however, that in determining Total Funded Debt to EBITDA for purposes of determining the Facility Fee Percentage, the items referenced in clause (vii) of the definition of EBITDA shall be omitted. Notwithstanding the foregoing, the initial Facility Fee Percentage shall be determined as set forth in Section 4.6 hereof. Any changes to the Facility Fee Percentage will be effective as of the date specified in Section 4.6." (e) The Credit Agreement is hereby further amended by deleting the definition of "Revolving Credit Commitment" from Section 1.1 and substituting in lieu thereof the following new definition of "Revolving Credit Commitment": "Revolving Credit Commitment shall mean, with respect to each Lender, the obligation of such Lender to make Revolving Loans to the Borrower and to participate in Swing Line Loans in an aggregate principal amount not exceeding the amount set forth with respect to such Lender on Schedule 1.1(c), or in the case of a Person becoming a Lender after April 6, 2001, the amount of the assigned "Revolving Credit Commitment" as provided in the Assignment and Acceptance Agreement executed by such Person as an assignee, as the same may be changed pursuant to the terms hereof, as the same may be increased or decreased from time to time as a result of any reduction thereof pursuant to Section 2.3., any assignment thereof pursuant to Section 11.6., or any amendment thereof pursuant to Section 11.2." (f) The Credit Agreement is hereby further amended by deleting Section 2.1(a) in its entirety and substituting in lieu thereof the following new Section 2.1(a): -4- 5 "(a) Subject to and upon the terms and conditions herein set forth, each Lender severally agrees to make to Borrower from time to time on and after the Closing Date, but prior to the Maturity Date, Revolving Loans; provided that, immediately after each such Revolving Loan is made, (i) such Lender's Revolving Credit Exposure does not exceed such Lender's Revolving Credit Commitment and (ii) the sum of the aggregate Revolving Credit Exposures of all Lenders does not exceed the lesser of (y) the Revolving Credit Commitments of all Lenders or (z) $400,000,000." (g) The Credit Agreement is hereby further amended by deleting Section 7.7(d) in its entirety and substituting in lieu thereof the following new Section 7.7(d): "(d) within forty-five (45) days after the end of each of its quarterly accounting periods, a statement certified as true and correct by a Financial Officer of the Borrower setting forth (i) the Total Funded Debt to EBITDA ratio for purposes of determining compliance with Article 8 and (ii) the Total Funded Debt to EBITDA ratio for purposes of determining the Applicable Margin and the Facility Fee Percentage, in each case as of the last day of such quarterly accounting period;" (h) The Credit Agreement is hereby further amended by deleting Section 8.13 in its entirety and substituting in lieu thereof the following new Section 8.13: "SECTION 8.13. RESTRICTED PAYMENTS. The Borrower will not, and will not permit its Restricted Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any dividend on any class of its stock, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement, defeasance or other acquisition of, any shares of common stock or any options, warrants, or other rights to purchase such common stock, whether now or hereafter outstanding (each, a "Restricted Payment"), except for (a) dividends payable by the Borrower solely in shares of any class of its common stock, (b) Restricted Payments made by any Subsidiary to the Borrower or to another Restricted Subsidiary and (c) cash dividends paid on, and cash repurchases of, the common stock of the Borrower; provided, that (i) no Default or Event of Default has occurred or would occur as a result of paying such dividend or repurchases, (ii) at the time of -5- 6 payment of such dividend and after giving effect to such payment, the Borrower and any Restricted Subsidiary could incur an additional $1.00 of Funded Debt under Section 8.1 and 8.3, respectively, of this Agreement and (d) repurchases of Borrower's common stock in an aggregate amount not to exceed, from the Closing Date through the Maturity Date, the sum of (i) $20,000,000 plus (ii) 50% of the amount by which cumulative Consolidated Net Income commencing with the fiscal year ending September 30, 2001 exceeds $20,000,000; so long as (x) no Default or Event of Default has occurred or would occur as a result of such payment and (y) at the time of such payment and after giving effect to such payment, the Borrower and any Restricted Subsidiary could incur an additional $1.00 of Funded Debt under Section 8.1 and 8.3, respectively, of this Agreement, and (z) at the time of such payment, the Borrower has Investment Grade Status from at least one Rating Agency." (f) The Credit Agreement is hereby further amended by adding Schedule 1.1(c) attached hereto thereto. Section 2. Reduction of Revolving Credit Commitment. Upon the effectiveness of this Amendment, the Revolving Credit Commitment of all Lenders shall be reduced to $400,000,000 and each Lender's Revolving Credit Commitment as of the date hereof shall be as set forth on Schedule 1.1(c) attached hereto. If after giving effect to such reduction of the Revolving Credit Commitment, the principal amount of outstanding Revolving Loans and Swing Line Loans exceeds the Revolving Credit Commitment of all Lenders, then immediately following the effectiveness of this Amendment, the Borrower shall repay the amount of such excess in accordance with Section 2.3(c) of the Credit Agreement, together with any payments due under Section 4.13 of the Credit Agreement. Section 3. Benefits of Loan Documents. Each reference to the Credit Agreement in any of the Loan Documents shall be deemed to be a reference to the Credit Agreement as amended by this Amendment, and as the Credit Agreement may from time to time be further amended, supplemented, restated or otherwise modified in the future by one or more other written amendments or supplemental or modification agreements entered into pursuant to the applicable provisions thereof. Section 4. Conditions to Effectiveness of Amendment. The effectiveness of this Amendment is subject to the condition precedent that each of the following be received -6- 7 by the Agent (unless otherwise waived in writing by the Agent), each of which shall be satisfactory in form and substance to the Agent: (a) this Amendment executed by the Borrower and by the Required Lenders; (b) the Acknowledgment and Consent of the Guarantors, substantially in the form of Exhibit A hereto, executed by each of the Guarantors (as defined below) (the "Acknowledgment"); (c) payment by the Borrower to the Agent of an amendment fee in an amount equal to .10% of the Revolving Credit Commitments (after giving effect to the Amendment) of those Lenders who have executed this Amendment ("Approving Lenders") for distribution by the Agent to the Approving Lenders on a pro rata basis based upon their Applicable Commitment Percentage; provided, however, no such amendment fee will be paid to any Lender that fails to return an executed original of this Amendment to the Agent on or before April 6, 2001; (d) payment by the Borrower to the Agent, of any and all other fees and expenses which are due and payable; (e) a certificate of incumbency signed by the Secretary or Assistant Secretary (or other individual performing similar functions) of the Borrower with respect to each of the officers of the Borrower authorized to execute and deliver this Amendment and attaching and certifying copies of the resolutions of the board of directors of the Borrower, authorizing the execution, delivery and performance of this Amendment; and (f) such other approvals, opinions or documents as the Agent may reasonably request. Section 5. Representations. The Borrower represents to the Lenders that: (a) The Borrower has the right and power, and has taken all necessary action to authorize it, to execute and deliver this Amendment, and to perform this Amendment, and the Credit Agreement, as amended by this Amendment, in accordance with their respective terms. This Amendment has been duly executed and delivered by the duly authorized officers of the Borrower, and each of this Amendment, and the Credit Agreement, as amended by this Amendment, is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. -7- 8 (b) The execution and delivery of this Amendment, and the performance by the Borrower of this Amendment, and the Credit Agreement, as amended by this Amendment, in accordance with their respective terms, do not and will not, by the passage of time or the giving of notice, or otherwise: (i) violate any Requirement of Law relating to the Borrower; (ii) conflict with, result in a breach of or constitute a default under the charter or by-laws of the Borrower, or any of its Material Contractual Obligations; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower other than those permitted by the Credit Agreement. (c) The articles of incorporation and bylaws of the Borrower have not changed since delivery of such articles of incorporation and bylaws to the Lenders in connection with the consummation of the Credit Agreement. Section 6. Reaffirmation. The Borrower hereby repeats and reaffirms all representations and warranties made by the Borrower in the Credit Agreement and the other Loan Documents to which it is a party as of the date hereof with the same force and effect as if such representations and warranties were set forth in this Amendment in full except to the extent such representations expressly relate to an earlier date or have been updated to the extent permitted by the Credit Agreement. Section 7. Reaffirmation and Representations by Guarantors. By execution of the Acknowledgment, each Subsidiary that has executed a Subsidiary Guarantee (a "Guarantor"): (a) reaffirms its continuing obligations to the Agent and the Lenders under the Subsidiary Guarantee to which it is a party, and agrees that the transactions contemplated by this Amendment shall not in any way affect the validity and enforceability of such Subsidiary Guarantee, or reduce, impair or discharge the obligations of such Guarantor thereunder; and (b) represents to the Lenders that: (i) Such Guarantor has the right and power, and has taken all necessary action to authorize it, to execute and deliver this Acknowledgement, and to perform this Acknowledgement in accordance with its terms. This Acknowledgement has been duly executed and delivered by the duly authorized officers of such Guarantor, and the Acknowledgement is a legal, valid and binding obligation of such Guarantor enforceable against such Guarantor in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity; and -8- 9 (ii) the execution and delivery of this Acknowledgement, and the performance by such Guarantor of this Acknowledgement, do not and will not, by the passage of time or the giving of notice, or otherwise: (i) violate any Requirement of Law relating to such Guarantor; (ii) conflict with, result in a breach of or constitute a default under the charter or by-laws of such Guarantor, or any of its Material Contractual Obligations; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by such Guarantor other than those permitted by the Credit Agreement. Section 8. Benefits. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Section 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. Section 10. Effect. Except as expressly herein amended, the terms and conditions of the Credit Agreement shall remain in full force and effect. Section 11. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon all parties. [Signatures on following page] -9- 10 IN WITNESS WHEREOF, the parties have caused this First Amendment to Credit Agreement to be executed by their authorized officers all as of the day and year first above written. ROCK-TENN COMPANY (CORPORATE SEAL) By: -------------------------------------- Title: ----------------------------------- Attest: By:____________________ Title: [Signatures Continued on Next Page] -10- 11 [SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT] SUNTRUST BANK, AS AGENT, SWING LINE LENDER AND A LENDER By: -------------------------------------- Title: -------------------------------- WACHOVIA BANK, N.A., AS A LENDER AND DOCUMENTATION AGENT By: -------------------------------------- Title: -------------------------------- BANK OF AMERICA, N.A., AS A LENDER AND SYNDICATION AGENT By: -------------------------------------- Title: -------------------------------- THE CHASE MANHATTAN BANK, AS A LENDER By: -------------------------------------- Title: -------------------------------- THE BANK OF TOKYO-MITSUBISHI, LTD., AS A LENDER By: -------------------------------------- Title: -------------------------------- THE BANK OF NEW YORK, AS A LENDER By: -------------------------------------- Title: -------------------------------- [Signatures Continued on Next Page] -11- 12 [SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT] FIRST UNION NATIONAL BANK, AS A LENDER By: -------------------------------------- Title: -------------------------------- THE FUJI BANK, LIMITED, AS A LENDER By: -------------------------------------- Title: -------------------------------- BNP PARIBAS, AS A LENDER By: -------------------------------------- Title: -------------------------------- By: -------------------------------------- Title: -------------------------------- -12- 13 SCHEDULE 1.1(C) REVOLVING CREDIT COMMITMENTS
- ------------------------------------------------------------------------------ Lender Revolving Credit Commitment - ------------------------------------------------------------------------------ SunTrust Bank $93,333,333 - ------------------------------------------------------------------------------ Wachovia Bank, N.A. $84,444,444 - ------------------------------------------------------------------------------ Bank of America, N.A. $84,444,444 - ------------------------------------------------------------------------------ The Chase Manhattan Bank $35,555,556 - ------------------------------------------------------------------------------ The Bank of Tokyo-Mitsubishi, $35,555,556 Ltd. - ------------------------------------------------------------------------------ The Bank of New York $17,777,778 - ------------------------------------------------------------------------------ First Union National Bank $17,777,778 - ------------------------------------------------------------------------------ The Fuji Bank, Limited $17,777,778 - ------------------------------------------------------------------------------ BNP Paribas $13,333,333 - ------------------------------------------------------------------------------
14 ACKNOWLEDGMENT AND CONSENT OF SUBSIDIARY GUARANTORS Each of the undersigned Subsidiaries hereby (i) acknowledges receipt of the foregoing First Amendment to Credit Agreement by and among Rock-Tenn Company, the Lenders under the Credit Agreement (the "Lenders") and SunTrust Bank, in its capacity as Agent for the Lenders (the "Agent") (the "Amendment"), (ii) consents to the Amendment, (iii) agrees and acknowledges to the terms thereof including, without limitation, the representations and agreements of the each of the undersigned set forth in Section 7 of the Amendment, and (iv) restates and affirms its respective obligations under its Subsidiary Guarantee previously executed and delivered in favor of the Agent (for the ratable benefit of the Lenders) without defense, counterclaim or set-off. 15 IN WITNESS WHEREOF, each of the undersigned Subsidiaries has executed this Acknowledgment and Consent of Subsidiary Guarantors this 6th day of April, 2001. ROCK-TENN COMPANY, MILL DIVISION, a Tennessee corporation ROCK-TENN COMPANY OF TEXAS, a Georgia corporation ROCK-TENN COMPANY OF ARKANSAS, a Georgia corporation ROCK-TENN COMPANY OF CALIFORNIA, INC., a Delaware corporation ROCK-TENN COMPANY OF ILLINOIS, INC., an Illinois corporation ROCK-TENN CONVERTING COMPANY, a Georgia corporation CONCORD INDUSTRIES, INC., an Illinois corporation WABASH CORPORATION, a Delaware corporation WALDORF CORPORATION, a Delaware corporation BEST RECYCLING, INC., an Iowa corporation WALDORF REALTY, INC., a Delaware corporation ROCK-TENN PARTITION COMPANY, a Georgia corporation WALDORF CORPORATION OF MINNESOTA, a Delaware corporation By: -------------------------------------- Name: -------------------------------- Title: -------------------------------- -2- -----END PRIVACY-ENHANCED MESSAGE-----