Executing Our Strategy, Delivering Exceptional Value. RockTenn Investor Day Presentation February 22, 2013

Transcription

1 Executing Our Strategy, Delivering Exceptional Value RockTenn Investor Day Presentation February 22, 2013

2 Introduction Jim Rubright Chairman and Chief Executive Officer Page 2

3 Cautionary Statement Regarding Forward-Looking Information Statements in this presentation that do not relate strictly to historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that give guidance for future periods, including, but not limited to the slides entitled RockTenn Platform for Continued Success, RockTenn s Core Business Principles, Synergies and Performance Improvements On Track, Focus on Execution and Increasing Cash Flow, Folding Carton Strategy: 2013 and Beyond, Improved Results Across the Containerboard Mill Division, Hodge, LA Mill Reconfiguration and Improvements, Hopewell, VA Mill Modernization, Next Steps Producing Improved Results, Synergies and Performance Improvements, Accomplishments and Next Steps, Significant Improvement Opportunities in Containerboard Supply Chain, Current OCC Market Conditions, Financial Strategy: Provide Flexibility to Execute Our Business Plan, Investing for Competitive Advantage, Reduced Contributions to Pension Plans and Executing Our Strategy, Delivering Exceptional Value. Forward-looking statements are based on our current expectations, beliefs, plans or forecasts and use words in this presentation such as will, estimate, trending, or refer to future time periods. You should not place undue reliance on any forward-looking statements as such statements involve risks, uncertainties, assumptions and other factors that could cause actual results to differ materially, including the following: our belief that the corrugated industry fundamentals are improving, our ability to integrate Smurfit-Stone or to achieve benefits from the Smurfit-Stone acquisition, including, without limitation, synergies, performance improvements and successful implementation of capital projects; expected cash flow; expected price realization; expected levels of depreciation and amortization, corporate expenses, interest expense, income tax rates, federal NOLs, Black Liquor and AMT tax credits, pension expense and contributions, capital expenditures, commodity costs, maintenance outages, containerboard inventory builds; the level of demand for our products; economic downtime; our ability to successfully identify and make performance improvements; anticipated returns on our capital investments; possible increases in energy, raw materials, shipping and capital equipment costs; any reduction in the supply of raw materials; fluctuations in selling prices and volumes; intense competition; the potential loss of certain customers; adverse changes in general market and industry conditions and other risks, uncertainties and factors discussed in Item 1A "Risk Factors" and under the caption "Business Forward-Looking Information" in our 2012 Annual Report on Form 10-K and by similar disclosures in any of our subsequent SEC filings. The information contained herein speaks as of the date hereof and we do not have or undertake any obligation to update such information as future events unfold. Page 3

4 Disclaimer and Use of Non-GAAP Financial Measures and Reconciliations We may from time to time be in possession of certain information regarding RockTenn that applicable law would not require us to disclose to the public in the ordinary course of business, but would require us to disclose if we were engaged in the purchase or sale of our securities. This presentation shall not be considered to be part of any solicitation of an offer to buy or sell RockTenn securities. This presentation also may not include all of the information regarding RockTenn that you may need to make an investment decision regarding RockTenn securities. Any such investment decision should be made on the basis of the overall mix of information regarding RockTenn that is publicly available as of the date of such decision. We have included financial measures that are not prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The non-gaap financial measures presented are not intended to be a substitute for GAAP financial measures, and any analysis of non-gaap financial measures should be used only in conjunction with results presented in accordance with GAAP and the reconciliations of non-gaap financial measures to GAAP financial measures included in the Appendix to this presentation. Page 4

5 RockTenn Platform for Continued Success RockTenn has leadership positions in excellent paper-based packaging businesses Our businesses have consistently delivered strong returns and growing free cash flow, and our investment and acquisition strategies have generated outstanding returns Our large virgin containerboard mill system is an economically irreplaceable asset with terrific upside potential Our mix of 55% virgin and 45% recycled fiber provides a sustainably low cost position and the opportunity of peak earnings in low recycled fiber cost markets In the near term, synergies and performance improvements and untapped cost reduction potential are expected to increase margins and free cash flow (1) We have a proven cohesive leadership team working together to deliver on our opportunities and produce outstanding returns (1) Free cash flow is a Non-GAAP item Page 5

6 10 Years of Outstanding Returns $90 $80 $70 $60 $50 $40 $30 $20 $10 RKT Stock Price (4) Gulf States Paper Southern Container EBITDA Multiple: 6.2x (1) EBITDA Multiple: 6.2x (2) Transaction Value: $552M Transaction Value: $1.1B $90 $80 $70 $60 $50 $40 $30 Smurfit-Stone 7,000 EBITDA Multiple: 6.2x (3) Transaction Value: $4.9B $0 $20 0 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 $10 6,000 5,000 4,000 3,000 2,000 1,000 7,000 6,000 RockTenn 5,000 S&P 500 4,000 3,000 2,000 1,000 S&P 500 RockTe S&P 500 $0 0 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 (1) Gulf States Paper EBITDA multiple based on $89 million of Pro Forma EBITDA for the 53 week period ended 4/3/2005. (2) Southern Container EBITDA multiple based on $148 million of Pro Forma EBITDA for the 52 week period ended 12/29/2007. Purchase price adjusted for the estimated $135 million benefit of the 338(h)(10) election. (3) Smurfit-Stone EBITDA multiple based on adjusted EBITDA, post-bankruptcy, and management estimates. (4) RKT close prices adjusted for dividends. Page 6

7 Strong Cash Flow Returns Fiscal Year Ended Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 FCF Yield (1) 12.0% 21.4% 15.9% 20.5% 20.2% 15.1% 21.1% 14.2% 12.9% 15.1% Free Cash Flow (1) $ 64 $ 109 $ 89 $ 113 $ 151 $ 166 $ 322 $ 260 $ 250 $ 518 (1) Free cash flow is cash generated for Net Debt repayment, dividends, acquisition / investments and pension in excess of expense. See Use of Non-GAAP Financial Measures and Reconciliations in the Appendix. Page 7

8 Agenda Introduction Jim Rubright Chairman and Chief Executive Officer Overview Steve Voorhees President and Chief Operating Officer Consumer Packaging Mike Kiepura President, Consumer Packaging and Recycling Merchandising Displays Craig Gunckel Executive Vice President and General Manager Corrugated Packaging Jim Porter President, Corrugated Packaging Containerboard Mills Tom Stigers Senior Vice President and General Manager Corrugated Containers Jeff Chalovich Senior Vice President and General Manager Supply Chain & Logistics John O Neal Senior Vice President Recycling Erik Deadwyler Senior Vice President and General Manager Financial Steve Voorhees President and Chief Operating Officer Q&A Leadership Team Page 8

9 Overview Steve Voorhees President and Chief Operating Officer Page 9

10 Who We Are RockTenn Overview One of North America s leading integrated manufacturers of corrugated and consumer packaging Net Sales $9.2 billion (LTM 1Q FY2013) Employees 26,000 Production 9.3 million tons of mill capacity 100 billion square feet of converting production Approximately 60% integrated Locations 213 operating facilities, primarily in North America LTM 1Q FY2013 Net Sales: $9.2 billion LTM 1Q FY2013 Segment Income: $741 million (1) Corrugated Packaging 66% Consumer Packaging & Recycling 34% Corrugated Packaging 53% Consumer Packaging & Recycling 47% (1) Excludes $6.7 million of post-closure losses at Matane and $0.4 million of acquisition inventory step-up expense Page 10

11 RockTenn s Operating Facilities West Point, VA Containerboard Mill New Lenox, IL Box Plant Marion, NC Folding Carton Plant Page 11

12 RockTenn s Core Business Principles RockTenn will be the most respected company in our business by: Providing superior paperboard, packaging and marketing solutions for consumer products companies at very low costs Investing for competitive advantage Maximizing the efficiency of our manufacturing processes by optimizing economies of scale Systematically improving processes and reducing costs throughout the company Seeking acquisitions that can dramatically improve the business Page 12

13 RockTenn Overall Customer Satisfaction Scores? On a scale of 1 to 10, where 10 means "completely satisfied" and 1 means completely dissatisfied," how would you rate your Overall Satisfaction with RockTenn? 8.77 Minimum World Class Dissatisfied At risk Satisfied No ROI Page 13

14 Synergies and Performance Improvements On Track 1Q FY2013 Run Rate of Synergies and Performance Improvements $325 million Remaining $225 million of Synergies and Performance Improvements (4Q FY2014) Box Plants $42 Energy Projects $25 Recycling & Merch. Displays $13 Duplicative Corporate Costs $25 Reduced Support Costs $25 Energy Projects $25 Recycling & Merch. Displays $25 Reduced Support Costs $20 Procurement $15 Mill & Supply Chain $95 Procurement $100 Box Plants $80 Mill & Supply Chain $60 Page 14

15 Focus on Execution and Increasing Cash Flow FY2012 and 1Q FY2013 Accomplishments FY2013 Goals FY2014 Outlook Senior leadership organization in place and executing well Improved execution across the Corrugated business Run rate of synergies and performance improvements of $325 million Refinanced debt to further strengthen the balance sheet and maintain strong liquidity LTM free cash flow generated of $578 million or $7.99 per share (1) (2) Improve customer satisfaction Improve execution across our businesses (mill, box, IT) Capture synergy and performance improvements Execute on additional opportunities to improve cost structure Forecasted free cash flow of $700 million or $9.50 to $9.75 per share (3) Achieve $550 million synergy and performance improvement commitment Continue to improve execution across our businesses Implement additional performance improvement opportunities $400 to $450 million capital expenditures Forecasted free cash flow per share of $10.50 to $11.50 assuming flat selling prices and 2% to 2.5% inflation on cost inputs from the end of FY2013 (3) (1) Cash generated for Net Debt repayment, dividends, acquisition / investments and pension in excess of expense. See Use of Non-GAAP Financial Measures and Reconciliations in the Appendix. (2) Cash Flow Per Share Calculation based on average diluted shares outstanding for the four quarter period of 72.3 million shares (3) Cash available for dividends, pension in excess of expense, acquisitions and net debt reduction. Based on approximately 73 million shares in FY2013 and 74 million shares in FY2014 Page 15

16 Consumer Packaging Mike Kiepura President, Consumer Packaging and Recycling Page 16

17 Who We Are Consumer Packaging Rankings 2 nd largest North American producer of 100% coated recycled paperboard 2 nd largest North American producer of folding cartons Largest North American producer of merchandising displays Largest producer of solid fiber partitions Net Sales (1) $2.5 billion (LTM 1Q FY2013) Employees 8,800 Locations North America (U.S., Canada, Mexico), Chile, Argentina Facilities 5 coated recycled paperboard mills 1 virgin solid bleached sulphate and bleached market pulp mill 5 uncoated recycled boxboard mills (including 1 gypsum mill) 21 folding carton plants 15 solid fiber partition plants 20 merchandising display and assembly plants Products 100% coated and uncoated recycled boxboard (CRB/URB) Solid bleached sulphate paperboard (SBS) Southern bleached softwood kraft market pulp (SBSK) Folding cartons Temporary and permanent merchandising displays Solid fiber partitions Certifications All wholly-owned North American plants and mills are certified to the SFI Fiber Sourcing standard and Triple Chain-of-Custody (SFI, FSC and PEFC) certified (1) Net sales includes intersegment and intrasegment sales Page 17

18 Well Positioned in the North American Folding Carton Industry 2 nd largest producer of CRB 2012 industry CRB operating rate at 92.5% (1) RockTenn 2012 operating rate of 94.8% (2) 2012 industry SBS operating rate of 93.1% (1) RockTenn 2012 operating rate of 100.0% (2) CRB Market Share ~2.5 Million Ton Market SBS Market Share ~6.4 Million Ton Market Weyerhaeuser 5% Tembec 3% RockTenn 7% Other 27% Graphic Packaging 35% Clearwater 11% IP 28% Paperworks 12% Evergreen 12% MeadWestvaco 22% RockTenn 26% Georgia-Pacific 12% Source: Lockwood-Post and Management Estimates (1) Source: RISI (2) LTM production divided by current capacity Source: JP Morgan Page 18

19 North American Folding Carton Industry Consolidation 2012 Market Share Concentration $8.8B Market Size 2012 Estimated Market Share (Based on Sales) Others 41% Top 4 59% Graphic Packaging RockTenn MeadWestvaco 32% 13% 9% 2000 Market Share Concentration $8.6B Market Size AGI-Shorewood 5% Top 4 Share 59% Others 40% Top 10 60% All Others 41% Source: RockTenn Estimates Page 19

20 RockTenn Folding Carton >90% Food and Consumer Staples Household Goods 6% Other Non-foods 5% Beverages & Other Foods 11% Paper Products & Office Supplies 6% Cereals & Other Dry Foods 11% Health & Beauty 11% Frozen Foods 10% Cookies, Crackers & Snacks 16% Dairy, Ice Cream & Frozen Novelty 8% Quick-serve & Take-out 16% Source: Management Estimates Page 20

21 RockTenn Folding Carton Outpacing the Industry FY FY2012 Performance CAGR Sales Volume Price 2.5% 2.0% 2.2% 1.9% 1.5% 1.0% 1.1% 0.5% 0.3% 0.0% -0.5% -1.0% -1.5% -2.0% -0.5% -1.6% Sales Volume Price Folding Carton Industry ** (1) RockTenn (1) Source: PPC Market Flash Report Page 21

22 Folding Carton Income Growth FY2007 FY2012 Folding Carton Growth $ in millions $ in millions $100 $1,400 $1,234 $1,217 $90 $1,161 $1,177 $1,150 $1,094 $80 $1,200 $70 $1,000 $60 $800 $50 $93 $40 $85 $79 $600 $71 $30 $55 $400 $20 $39 $200 $10 From 2007 to 2012 Average sales per plant increased from $51 million to $68 million Average operating income per plant increased from $1.6 million to $4.4 million Folding Carton income CAGR = 19% Return on sales increased from 3.6% to 7.6% $0 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Segment Income Net Sales (1) $0 (1) Net sales includes intersegment and intrasegment sales Page 22

23 How We Grow Income Focus on profitable revenue and performance excellence opportunities Sales per employee increase of 32% Productivity per employee increase of an estimated 18% (MSF/EE) Division OEE increase of 12% Fewer, bigger plants Closed seven plants ( ) Sales retention from closed plants > 95% SG&A as a percent of sales reduced from 8.3% to 6.7% Better capitalized plants Cumulative capital of $184 million ($31 million/yr. average) Reduced number of full-time employees by 837 (or 18%) Note: All statistics compare FY2007 to FY2012 data unless otherwise noted. Page 23

24 Folding Carton Strategy: 2013 & Beyond Continued performance excellence significant initiative focused on driving out cost 100% employee participation in attacking all forms of loss 5.5% annual productivity improvement 8% annual waste reduction 8% annual quality improvement Modify network of folding carton plants based on market fundamentals, customer requirements and financial justification Capital expenditures to reduce cost Continue to modernize the asset base Page 24

25 Who We Are Consumer Packaging Mills Rankings Net Sales (1) Employees Locations Products Certifications 2 nd largest North American producer of coated recycled paperboard (CRB) Approximately $925 million (LTM 1Q FY2013) 1,750 (includes CRB, SBS & URB) 11 mills in the U.S. 100% coated recycled paperboard (CRB) 100% uncoated recycled paperboard (URB) Market pulp (SBSK) Approximately 45% integrated All wholly-owned North American mills are certified to the SFI Fiber Sourcing standard and Triple Chain-of-Custody (SFI, FSC and PEFC) certified (1) Net sales includes intersegment and intrasegment sales Page 25

26 Low Cost Consumer Packaging Mills St. Paul, MN Coated Recycled Board Capacity: 165K tons Battle Creek, MI Coated Recycled Board Capacity: 160K tons Aurora, IL Uncoated Recycled Board Capacity: 32K tons Missisquoi, VT Coated Recycled Board Capacity: 110K tons Eaton, IN Uncoated Recycled Board Capacity: 64K tons Cincinnati, OH Uncoated Recycled Board Capacity: 55K tons Chattanooga, TN Uncoated Recycled Board Capacity: 140K tons Dallas, TX Coated Recycled Board Capacity: 125K tons Demopolis, AL Bleached Paperboard Market Pulp (SBSK) Capacity: 450K tons Stroudsburg, PA Coated Recycled Board Capacity: 80K tons Lynchburg, VA Gypsum Liner Capacity: 103K tons Page 26

27 SBS, CRB & CUK Transactional Market Price Price per ton $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 SBS CRB CUK Page 27

28 Merchandising Displays Craig Gunckel Executive Vice President and General Manager Page 28

29 Who We Are Merchandising Displays RockTenn Merchandising Displays provides world-class promotional and permanent merchandising solutions, including fulfillment and distribution services, to top consumer product companies and retailers. Our mission is to provide best-in-class, in-store solutions that achieve brand, shopper and retailer objectives at the lowest total cost. Rankings Largest North American producer of point-of-purchase displays Net Sales (1) Approximately $650 million (LTM 1Q FY2013) Employees 2,200+ full-time employees 2,500+ full-time equivalent contract employees Design & engineering group of 200+ Locations North America (U.S., Canada) Facilities 6 manufacturing plants 22 sales and design offices 14 fulfillment facilities Products Promotional displays Permanent displays Litho-laminated packaging Fulfillment services Retail insights (1) Net sales includes intersegment and intrasegment sales Page 29

30 Merchandising Displays Critical to Our Customers Success Innovation Design, creative, retail insights, new technology Supply chain solutions, IT, global partnerships World class efficiencies to drive client ROI Execution Service, project management Manufacturing, assembly Logistics Partnering with the customer and other RockTenn businesses Low Cost Capabilities Scale Customization approach Page 30

31 Consumer Product Companies and Retail Clients Page 31

32 Corrugated Packaging Jim Porter President, Corrugated Packaging Page 32

33 Who We Are Corrugated Packaging Rankings 2 nd largest North American producer of corrugated packaging 2 nd largest North American producer of containerboard Largest producer of white top linerboard Largest producer of preprint linerboard Net Sales (1) Approximately $6.2 billion (LTM 1Q FY2013) Employees 15,780 Locations North America (U.S., Canada, Mexico) Facilities 101 converting facilities throughout the U.S., Canada, Mexico 13 containerboard mills Production 78 billion square feet of converting production 7.5 million tons of containerboard capacity 0.3 million tons of kraft fluff pulp Products Virgin and 100% recycled linerboard and medium White top linerboard Fluff pulp Corrugated containers Preprint linerboard Retail ready packaging Food service packaging Automated packaging equipment Meta platform Certifications All wholly-owned North American plants and mills are certified to the SFI Fiber Sourcing standard and Triple Chain-of-Custody (SFI, FSC and PEFC) certified RockTenn Containerboard Shipments FY2012 Internal 70% Export 13% Domestic 17% Note: internal includes trade shipments. (1) Net sales includes intersegment sales Page 33

34 Virgin Containerboard Mills Economically Irreplaceable 5,858K Tons of Capacity Liner 3,192 White Top & SBL 1,184 Medium 1,190 Pulp 292 La Tuque, QC White Top Linerboard SBL Capacity: 476K tons Coshocton, OH Semi-Chemical Medium Capacity: 305K tons West Point, VA White Top Linerboard Capacity: 708K tons Stevenson, AL Semi-Chemical Medium Capacity: 885K tons Hopewell, VA Kraft Linerboard Capacity: 443K tons Hodge, LA Kraft Linerboard Capacity: 800K tons Florence, SC Kraft Linerboard Capacity: 683K tons Panama City, FL Kraft Linerboard Fluff Pulp Capacity: 628K tons Fernandina Beach, FL Kraft Linerboard Capacity: 930K tons Page 34

35 Recycled Containerboard Mills Highly Flexible 1,953K Tons of Capacity Liner 935 Medium 1,018 St. Paul, MN Recycled Medium Capacity: 200K tons Solvay, NY Recycled Linerboard & Medium Capacity: 805K tons Capacity: 805K tons Uncasville, CT CT Recycled Medium Capacity: 165K tons West Point, VA Recycled Medium Capacity: 183K tons Seminole, FL FL Recycled Linerboard & Medium Capacity: 600K tons Capacity: 600K tons Page 35

36 Corrugated Packaging Opportunities People Operations Strong RockTenn leadership team intensely focused on delivering results Building stronger technical, engineering and operating teams Executing the RockTenn culture Asset optimization mill and box Invest for competitive advantage disciplined project planning and execution Performance Excellence and Lean Six Sigma across enterprise, including Supply Chain Invest in decision-making systems to increase efficiencies and reduce costs Customers Customer satisfaction through no-fail quality basics and innovative, value-added products Commercial Excellence price increase execution Page 36

37 A Healthy Containerboard Industry Containerboard Exports and Imports Thousands of Tons Operating Rate % - Linerboard & Corrugated Medium 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Exports Imports Linerboard Medium Source: AF&PA Source: AF&PA Containerboard Inventories - Mills & Box Plants (Millions of tons, Weeks of supply) Linerboard and Corrugated Medium Price ($/ton) Pulp & Paper Week Index Tons Inventories (Tons) Weeks Weeks $750 Linerboard Medium $700 $650 $600 $ $ $450 Source: AF&PA Source: RISI Page 37

38 Containerboard Mills Tom Stigers Senior Vice President and General Manager Page 38

39 Who We Are Containerboard Mills Rankings 2 nd largest North American producer of containerboard Largest producer of white top linerboard Employees 4,550 employees Locations 13 mills in the U.S. and Canada Products 100% recycled linerboard and medium Virgin linerboard and medium White top linerboard Fluff pulp Approximately 70% integrated Certifications All North American mills are certified to the SFI Fiber Sourcing standard and Triple Chain-of-Custody (SFI, FSC and PEFC) certified Page 39

40 Improved Results Across the Containerboard Mill Division Installed divisional leadership team and key mill managers Implementing the RockTenn culture at all levels Improved planning and capital project execution Increased production reliability Delivering solid financial results Substantial improvements at Hodge, LA Mill Page 40

41 Hodge, LA Mill Reconfiguration and Improvements Transformative capital project Permanently shut Kraft bag machine, medium machine and semi-chemical pulping line Current configuration of two highly productive lightweight liner machines, Kraft and recycled fiber New leadership team Major outage in May 2013 Paper Machine #4 design modifications Annual maintenance outage Steady improvements in productivity Improved financial results Page 41

42 Hopewell, VA Mill Modernization Two phase project April 2013: quality, reliability, cost and grade capabilities Paper machine: major equipment and control upgrade Power: boiler natural gas installation, biomass fuel system upgrade April 2014: cost and productivity, 120K TPY Paper machine: productivity increase equipment; expand finished goods storage Power: major recovery boiler maintenance; turbine generator upgrade Page 42

43 Next Steps Producing Improved Results Increase customer satisfaction Quality Management System implementation Improve reliability and operating results Reliability based maintenance Expanding our Lean Six Sigma program Improve cost structure Wood and recycled fiber savings Energy reduction projects Invest in high return projects 20%-30% return rates Drive financial performance Driving better commercial decisions for the integrated enterprise Page 43

44 Corrugated Container Jeff Chalovich Senior Vice President and General Manager Page 44

45 Who We Are Corrugated Container Rankings 2 nd largest North American producer of corrugated packaging Largest producer of preprint linerboard Employees 11,000 Locations Facilities North America (U.S., Canada, Mexico) 101 converting facilities 74 corrugated manufacturing plants 17 sheet plants 4 sheet feeders 5 high-impact graphics facilities 1 Automated Packaging System facility Products Shipping containers Retail-ready packaging Food service packaging Bulk bins Certifications All wholly-owned North American plants are certified to the SFI Fiber Sourcing standard and Triple Chain-of-Custody (SFI, FSC and PEFC) certified Page 45

46 Container Attractive Consumer End Markets (1) RockTenn packaging end markets consist of over 88% of sales for the food and beverage and consumer non-durables segments. Accounts are distributed 45% national customers and 55% regional and local customers. All Other 5% Durable 7% Produce 6% Graphics 3% Pharmaceutical 2% Other Food/Beverage 27% Protein 6% Pizza 9% Consumer Non-Durable 15% Paper Goods 20% (1) Sales by end use based on management estimates Page 46

47 Corrugated Container Keys to Success Satisfy our customer every time Improve commercial capabilities Improve operational performance Invest for competitive advantage and economies of scale Driving better commercial decisions for the integrated enterprise Page 47

48 Satisfy our Customers Every Time Identify and commit to meeting customer needs Relentless focus on delivering high-quality boxes on time, every time Install a quality information platform that allows customer-issue tracking, shop-floor data collection and document control Measure customer satisfaction on time delivery, cost of quality, surveys Page 48

49 Commercial Excellence Bringing discipline and a standardized approach to pricing Centralized national accounts pricing Standardize commercial terms Installing Pre-Pricing Specialists Pay-for-Performance based on sales margin Page 49

50 Box Plant Closures Closed 15 box plants to date Maintained annual volume at 78 billion square feet Increased average volume per box plant by 100 million square feet Reduced full-time employees by 870 Annualized run-rate savings of $27 million at end of December 2012 has increased to $35 million Page 50

51 Synergies and Performance Improvements (1) $ in millions $160 1Q FY2013 By End of FY2014 $140 $135 $120 $100 $80 $79 $60 $40 $27 $40 $42 $20 $15 $16 $0 Closures Operations Investment Total $0 (1) All numbers represent annualized run rates Page 51

52 Investing for Competitive Advantage Typical Legacy Smurfit-Stone Converting Plant 98 Corrugator 24 Flexo 38 Flexo 66 RDC 38 Flexo 66 RDC 50 Flexo 66 RDC Prototype Converting Plant New High Speed Flexo New High Speed Flexo New High Speed RDC 98 Corrugator Plant footprint Standardization of plant equipment Commonality parts and stores Labor force reduction Reduced maintenance hours and standard maintenance tasks Improved Cost Competitiveness! Page 52

53 Accomplishments and Next Steps Accomplishments Closed 15 box plants Executed 2 strategic acquisitions Began implementing Commercial Excellence Annual synergies and performance benefits through first quarter of FY2013 of $42 million; expect $135 million by end of FY2014 Next steps Invest for competitive advantage Performance Excellence Commercial Excellence Drive the RockTenn culture Page 53

54 Supply Chain John O Neal Senior Vice President Page 54

55 Containerboard Supply Chain Central to Improvements in Commercial Capability Supply VIRGIN MILLS Coshocton, OH Stevenson, AL Demand Export Hodge, LA West Point, VA La Tuque, QC Hopewell, VA Panama City, FL Florence, SC Fernandina Beach, FL RECYCLED MILLS Seminole, FL Solvay, NY St. Paul, MN Uncasville, CT TRADE PARTNERS Supply Chain Driving better commercial decisions for the integrated enterprise Domestic Internal (box plants) Trade Partners Page 55

56 Containerboard Supply Chain Functions Production Planning Customer Service Dedicated Transportation TMS Logistics Operations Supply Chain Optimization Sales Analytics Containerboard Trades Financial Planning & Analysis Supply & Inventory Management Page 56

57 Significant Improvement Opportunities in Containerboard Supply Chain OPPORTUNITIES NEXT STEPS Supply chain well integrated with box plants and mills Execute on systems improvement initiatives Automated data collection and analysis tools to improve forecasting, replenishment and inventory planning Integrated data warehouse for supply chain operations including current and forward-looking operating costs, orders, transportation, inventory and commercial terms Planning and execution tools for spot, medium and long term planning improving ability to manage the integrated supply chain Continue transformation to a commercially driven organization EXPECTED RESULTS Improved business results utilizing commercial platform Continued evolution of commercial capability of supply chain team Improved mill / customer order pairings Improved externals sales and trade analytics Improved mill performance as paper machines run on sweet spots more consistently Lower transportation costs Improved inventory management Higher customer satisfaction Page 57

58 Recycling Erik Deadwyler Senior Vice President and General Manager Page 58

59 Who We Are Recycling Rankings One of the largest paper recyclers in North America managing over 8 million tons of recycled fiber annually Net Sales (1) $1.15 billion (LTM 1Q FY2013) Employees 850 Locations 32 U.S. recycling plants Trading operations headquartered in Atlanta 3 international trading offices Services Single stream processing Recycled fiber trading Waste spend management Manage 100% RockTenn fiber supply & marketing (1) Net Sales includes intersegment and intrasegment sales Page 59

60 Recycling Strategic Priorities We have taken immediate actions to increase profitability based on RockTenn business model Streamlined the organization and eliminated 60 net salaried employees, or 15%, including 3 vice presidents and 10 director-level roles. Annualized run-rate savings at 12/31/12 of $8 million. Exited 7 unprofitable, non-strategic legacy Smurfit-Stone operations Centralized the mid and back-office functions which support our 8.3 million tons per year into one location Page 60

61 Recycling Strategic Priorities Leverage our scale as one of the largest paper recyclers to create a highly efficient, low-cost fiber optimization platform Utilize our market expertise to source the optimal fiber for our internal mill system Create the lowest cost brokerage platform in the industry. Utilize the market intelligence gained from these transactions to make better commercial decisions. Invest in single-stream sorting capabilities at select, strategic operations to improve plant performance and our access to fiber supply Page 61

62 Current OCC Market Conditions U.S. supply up slightly Generation expected to remain relatively flat for balance of 2013 Domestic recovery rates expected to increase 0.5% to 89% U.S. demand increasing moderately Expect rebound from 2012 (2012 consumption down 2% vs. 2011) Export activity to Asia Exports to China represent 30% of total U.S. recovered fiber demand 5 million tons of recycled capacity planned to start up in Asia during the next 24 months China recovery rate expected to increase from current 44% Page 62

63 Financial Steve Voorhees President and Chief Operating Officer Page 63

64 Financial Strategy: Provide Flexibility to Execute Our Business Plan Invest in our business to maintain and improve operating results Reduce leverage to below 2.0x during FY2014 Maintain available liquidity of approximately $1.0 billion Maintain an investment-grade credit profile Return capital to shareholders through dividends and share repurchases Continue to seek strategic, favorably priced acquisitions that make us a better company Page 64

65 Investing for Competitive Advantage Capital Expenditures $ in millions $500 20%-30% After- Tax Return Projects $450 $400 $350 $300 $150-$200 million in additional capital investment opportunities $250 $200 $425-$450 million range $150 $100 $250 million maintenance capital $50 $0 FY2012 FY2013* FY2014 & FY2015* *Forecast Page 65

66 Reduced Contributions to Pension Plans GAAP Unfunded Liability $ in millions $600 $300 $0 ($300) ($600) ($900) ($1,089) ($654) ($265) $75 $339 ($1,200) 2013F 2014F 2015F 2016F 2017F 10 bps change in the yield curve impacts unfunded liability by approximately $42 million $ in millions $300 Cash Contributions $250 $200 $150 $100 $192 $231 $269 $241 $207 $50 $0 2013F 2014F 2015F 2016F 2017F Note: Includes Qualified Pension Plans only. Used CAD exchange rate of for FY 2013 and beyond Page 66

67 RockTenn s Financial Position Provides Significant Flexibility to Execute our Business Plan $ in millions $1,600 12/31/12 Capitalization ($ Millions) Cash $31 $1,457 $1,400 Total Debt (1) $3,259 Shareholders Equity $3,469 $350 $1,200 Total Capitalization $6,727 Credit Ratings S&P Moody s $991 $1,000 Corporate Rating BBB- Ba1 $ Bonds BB+ Ba1 $ Bonds BBB- Ba1 $631 Floating / Fixed Debt Mix 53% / 47% $600 $350 $400 $509 $200 $- $88 $92 $350 $80 $122 - FY2013 FY2014 FY2015 FY2016 FY2017 Thereafter Credit Facilities 2013 Notes 2019 Notes 2020 Notes 2022 Notes 2023 Notes A/R Securitization Other (1) Excludes unamortized bond discounts and terminated swaps aggregating $7.4 million Page 67

68 Executing Our Strategy, Delivering Exceptional Value Leadership positions in excellent paperboard packaging businesses Improving earnings and cash flow FY2014 forecasted free cash flow of $10.50 to $11.50 per share assuming flat selling prices and 2% to 2.5% inflation on cost inputs from the end of FY2013 (1) High-return investment opportunities to further improve our competitive position Reduce leverage to below 2.0x during FY2014 Continue to seek strategic, favorably priced acquisitions that make us a better company Return capital to shareholders through dividends and share repurchases (1) Cash generated for Net Debt repayment, dividends, acquisition / investments and pension in excess of expense. Based on approximately 74 million shares. Page 68

69 Executing Our Strategy, Delivering Exceptional Value Q&A

70 Management Bios Page 70

71 Jim Rubright Chairman and Chief Executive Officer RockTenn s Chief Executive Officer since 1999 Prior to joining RockTenn, served as Executive Vice President of Sonat Inc. Head of interstate natural gas pipeline and energy marketing businesses at Sonat Previously, Partner with the law firm King & Spalding Received a bachelor s degree from Yale College and law degree from the University of Virginia Law School Page 71

72 Steve Voorhees President and Chief Operating Officer RockTenn s President and Chief Operating Officer since January 2013 Served as Executive Vice President and Chief Financial Officer since 2000, and as Chief Administrative Officer since 2008 Prior to joining RockTenn, served in operations and executive roles at Sonat Inc. Received a bachelor s degree in economics and mathematics from Northwestern University and master s of business administration from the Darden School at the University of Virginia Page 72

73 Mike Kiepura President, Consumer Packaging and Recycling RockTenn s President of Consumer Packaging and Recycling overseeing RockTenn s coated paperboard mills and folding carton plants; Merchandising Displays and Specialty Paperboard Products groups; and recycling operations Joined RockTenn in 1995 and has served as Executive Vice President of the Consumer Packaging division; Executive Vice President of the company s Folding Carton business; Senior Vice President of Sales in the Folding Carton division; and Senior Vice President, Eastern Region, Folding Carton division Prior to joining RockTenn, served as the President of Olympic Packaging Received a bachelor s degree in engineering and applied physics from Harvard University and a master s of business administration from the J.L. Kellogg Graduate School of Management at Northwestern University Page 73

74 Craig Gunckel Executive Vice President, Merchandising Displays RockTenn s Executive Vice President and General Manager of RockTenn Merchandising Displays Joined RockTenn s Folding Carton Division in 1995 From 2004 to 2009, served as Vice President, Regional Sales-East Craig joined the Merchandising Displays (formerly Alliance) Division in 2009 Received a bachelor s degree in organizational leadership from Purdue University Page 74

75 Jim Porter President, Corrugated Packaging RockTenn s President of Corrugated Packaging leading the company s containerboard mills, corrugated box plants and graphics facilities Joined RockTenn in 2008 with the acquisition of Southern Container Corp. where he served as the President and Chief Operating Officer of Southern Container from 2004 to 2008; was Vice President and President of Solvay Paperboard, a subsidiary of Southern Container, from 1993 to 2008 Received a bachelor s degree in forest management from the University of Missouri and graduated from Harvard Business School s Advanced Management Program in 2004 Page 75

76 Tom Stigers Senior Vice President and General Manager Containerboard Mills RockTenn s Senior Vice President and General Manager of Containerboard Mills since 2012 Joined RockTenn with the Southern Container Corp. acquisition in 2008, where he served as Vice President of Solvay Paperboard; he had been with Southern Container since 2001 Worked within the paper industry since 1987 in various leadership roles with Champion International, Simpson, Donohue and Abitibi Consolidated Received bachelor s degrees in chemical engineering from Clarkson University and paper science and engineering from the State University of New York College of Environmental Science and Forestry as well as a master s of business administration from Adelphi University Page 76

77 Jeff Chalovich Senior Vice President and General Manager Corrugated Containers RockTenn s Senior Vice President and General Manager of RockTenn s Corrugated Container business Joined RockTenn in 2008 through the acquisition of Southern Container Corp., where he served in a variety of roles, including Sales Manager and General Manager of the Dayton, N.J., box plant; he joined Southern Container in 1998 Promoted to Vice President of Sales & Marketing in 2005 and took on the additional role of managing the graphics and preprint functions the following year Began his career in the paper industry following a fouryear tour of duty in the U.S. Army during which he served as an Officer Previously served in sales and sales management roles for Nekoosa Packaging and Weyerhaeuser Received a bachelor s degree in accounting from Clarion University Page 77

78 John O Neal Senior Vice President Supply Chain and Specialty Products RockTenn s Senior Vice President, Supply Chain and Specialty Products (white top, foodboard and pulp businesses) Prior to joining RockTenn, John served for 16 years in various executive roles for Mirant Corporation, a merchant energy company, where he gained extensive experience in corporate strategy, commercial operations, risk management, commodity trading, asset optimization, regulatory policy and plant operations Received a bachelor s degree in industrial engineering and operations research from the University of California, Berkeley, as well as a master s of business administration from the Goizueta Business School at Emory University Page 78

79 Erik Deadwyler Senior Vice President and General Manager Recycling RockTenn s Senior Vice President and General Manager of RockTenn Recycling where he leads the company s recycling plants and trading operation Joined RockTenn in 2002 and has served in a variety of positions, including Executive Vice President and General Manager of the Recycling business, Vice President of RockTenn Trading and Director of Commodity Risk Management Prior to joining RockTenn, served as Manager of Trading with Enron Industrial Markets Received a bachelor s degree in biology from the University of Missouri and a master s of business administration from the University of Georgia Page 79

80 Appendix Page 80

81 Use of Non-GAAP Financial Measures and Reconciliations 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. These measures may differ from similarly captioned measures of other companies in our industry. Page 81

82 Non-GAAP Measures: Net Debt We have defined the non-gaap measure Net Debt to include the aggregate debt obligations reflected in our balance sheet, less the hedge adjustments resulting from terminated and existing fair value interest rate derivatives or swaps, the balance of our cash and cash equivalents, restricted cash (which includes the balance sheet line items restricted cash and restricted cash and marketable debt securities) and certain other investments that we consider to be readily available to satisfy such debt obligations. Our management uses Net Debt, along with other factors, to evaluate our financial condition. We believe that Net Debt is an appropriate supplemental measure of financial condition and may be useful to investors because it provides a more complete understanding of our financial condition before the impact of our decisions regarding the appropriate use of cash and liquid investments. Page 82

83 Non-GAAP Measures: Free Cash Flow We also have defined the non-gaap financial measure Free Cash Flow which is also referred to as Cash Generated for Net Debt Repayment, Dividends, Acquisitions/Investments and Pension in Excess of Expense to be the sum of the non- GAAP measure Net Debt Repayment and the following cash flow statement line items: Cash dividends paid to shareholders, Cash paid for the purchase of business, net of cash acquired plus Investment in unconsolidated entity and Pension and other postretirement funding more than expense. Our management uses Free Cash Flow, along with other factors, to evaluate our performance. We believe that this measure is an appropriate supplemental measure of financial performance and may be useful to investors because it provides a measure of cash generated for the benefit of shareholders. It is not intended to be a substitute for GAAP financial measures and should not be used as such. Page 83

84 Non-GAAP Measures: Segment EBITDA and Segment EBITDA Margins Our management uses the non-gaap measures Segment EBITDA and Segment EBITDA Margins, along with other factors, to evaluate our segment performance against our peers. Management believes that investors also use these measures to evaluate our performance relative to our peers. Segment EBITDA and Segment EBITDA Margins are reconciled to the most directly comparable GAAP measures, Segment income and Segment sales. Page 84

85 Net Debt Reconciliation ($ in millions) Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Current Portion of Debt $ 62.9 $ 12.9 $ 85.8 $ 7.1 $ 40.8 $ 46.0 $ $ 56.3 $ $ $ Long-Term Debt Due After One Year , , , , , , , , ,412.5 Less: Hedge Adjustments Resulting From Fair Value Interest Rate Derivatives or Swaps (19.8) (23.9) (18.5) (12.3) (10.4) (8.5) (6.6) (3.8) (1.9) (0.4) (0.1) , , , , ,412.4 Less: Cash and Cash Equivalents (6.6) (14.2) (28.7) (26.8) (6.9) (10.9) (52.8) (11.8) (15.9) (41.7) (37.2) Less: Restricted Cash (19.2) Less: Investment in Marketable Securities - - (28.2) Net Debt $ $ $ $ $ $ $ 1,620.3 $ 1,333.8 $ 1,111.1 $ 3,403.7 $ 3,375.2 Page 85

86 Net Debt Reconciliation ($ in millions) Dec-11 Dec-12 Current Portion of Debt $ $ 87.4 Long-Term Debt Due After One Year 3, , , ,251.2 Less: Hedge Adjustments Resulting From Fair Value Interest Rate Derivatives or Swaps (0.3) (0.1) 3, ,251.1 Less: Cash and Cash Equivalents (41.0) (31.0) Net Debt $ 3,434.9 $ 3,220.1 Page 86

87 Free Cash Flow Reconciliation ($ in millions, except percentages) Fiscal year ended Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Net Debt $ $ $ $ $ $ $ 1,620.3 $ 1,333.8 $ 1,111.1 $ 3,403.7 $ 3,375.2 Less: Debt assumed in acquisition (243.1) - - (1,180.5) - Adjusted net debt , , , , ,375.2 Net debt repayment (41.2) 79.1 (467.3) (674.3) (1,112.1) 28.5 Cash dividends paid to shareholders Pension and postretirement funding more (less) than expense (8.7) (10.5) Cash paid for the purchase of business, net of cash acquired plus investment in unconsolidated entity (3.0) , Free Cash Flow $ 63.7 $ $ 89.3 $ $ $ $ $ $ $ Shares Outstanding - at 9/ Stock Price - at 9/30 $ $ $ $ $ $ $ $ $ $ Market Value of Equity at Beg. of Year $ $ $ $ $ $ 1,097.9 $ 1,528.4 $ 1,823.5 $ 1,937.8 $ 3,430.4 Free Cash Flow Yield 12.0% 21.4% 15.9% 20.5% 20.2% 15.1% 21.1% 14.2% 12.9% 15.1% Page 87

88 Free Cash Flow Reconciliation LTM 1Q FY2013 ($ in millions) LTM Dec-12 Net debt repayment $ Cash dividends paid to shareholders 74.5 Pension and postretirement funding more than expense Cash paid for the purchase of business, net of cash acquired plus investment in unconsolidated entity 38.2 Free Cash Flow $ Page 88

89 FY2012 Segment EBITDA and Segment EBITDA Margins Reconciliation ($ in millions, except percentages) Corrugated Packaging Consumer Packaging Recycling Corporate / Other Consolidated Segment sales $ 6,171.2 $ 2,557.5 $ 1,228.8 $ (749.9) $ 9,207.6 Segment income (1) $ $ $ 7.1 $ Depreciation and amortization Plus: Matane Mill EBITDA (2) Segment EBITDA $ $ $ 20.5 Segment EBITDA Margins 12.7% 17.3% 1.7% (1) Corrugated Packaging segment excludes $0.8 million of inventory step-up expense (2) For second quarter fiscal 2012 post closure losses Page 89