Mead Reports Second Quarter Results, Earnings Fall By Half, Cut Output
Press release from the issuing company
DAYTON, Ohio, July 18- The Mead Corporation today announced second quarter 2001 net earnings of $31.0 million or 31 cents per share, compared to $63.9 million or 62 cents per share in the same period in 2000. Mead reported an operating loss of $5.6 million or 6 cents per share in the first half of 2001 versus operating earnings of $87.1 million or 83 cents per share in the first half of 2000. The slowing economy resulted in lower prices for Mead's coated paper and corrugating medium businesses, which led to the company's earnings decline compared to the prior year. In addition, energy-related costs and foreign exchange impacts continued to negatively affect operating earnings. The first half of 2001 included the first quarter charge of 10 cents per share for the cumulative effect of an accounting change related to Statement of Financial Accounting Standards No. 133.
Net sales for the second quarter and first half of 2001 were essentially unchanged from the previous year. Second quarter sales were $1.15 billion and first half sales were $2.1 billion.
"Challenging economic conditions led to disappointing results for our commodity-based businesses-coated paper and containerboard. However, we are pleased to report improved results in consumer and office products and steady performance in our coated board system,'' said Jerry Tatar, Mead chairman, president and chief executive officer. "In the second half of the year, we will focus our attention on improving productivity, managing working capital, reducing costs, and meeting the needs of our customers. We will manage our businesses to meet the realities of the marketplace.''
Tatar added, "During the second quarter, we successfully completed startup of our new enterprise-wide resource planning system at our three large coated paper mills. The project continues to meet our expectations.''
The Paper segment had an operating loss of $2.8 million for the second quarter of 2001 versus operating earnings of $50.5 million for the prior-year second quarter. Sales were $463 million in the second quarter of 2001 compared to $454 million in the same period a year ago.
Even though sales volume improved, Mead Paper had lower earnings as prices declined for coated paper versus the second quarter of 2000. Prices fell during the second quarter due to weaker markets and competition from high levels of imports. Operating issues at Mead's Ohio mill during the first quarter of the year continued to affect performance in the second quarter. However, these issues were resolved by second quarter end.
In Mead's specialty paper businesses, results were below the second quarter of 2000, reflecting negative impacts of the slowing economy and strong dollar.
Packaging and Paperboard
Second quarter 2001 earnings for the Packaging and Paperboard segment declined to $44.2 million from $53.6 million in the same period in 2000. Sales were $412 million in the second quarter of 2001, compared to $436 million for the prior-year second quarter.
The segment's weaker results were primarily due to lower selling prices for corrugating medium and a less favorable sales mix. Consistent with the company's commitment to match supply with demand, Mead Containerboard took 10,000 tons of production downtime in the second quarter of 2001.
Sales and earnings for Mead's coated board system were consistent with results from the second quarter a year ago despite the impact of unfavorable foreign currency exchange rates on its international packaging operations.
Consumer and Office Products
Mead Consumer & Office Products had higher earnings of $41.6 million in the second quarter of 2001, up from $34.3 million in the same period in 2000. In the seasonally strong second quarter, sales were $277 million in 2001 versus $261 million in the same period a year ago.
Sales and earnings improved from prior-year levels as a result of sales volume growth in school supplies, including the new line of school products which was well received by retailers preparing for the back-to-school season. The segment's improved performance included operating improvements in the school business, benefits from the AT-A-GLANCE integration, facility rationalization and volume gains from an asset purchase earlier this year.
Mead's share of investees' earnings was $2.0 million in the second quarter of 2001 compared to $3.6 million for the same period in 2000. The decline resulted from lower prices for oriented strand board.
Weak market conditions are expected to continue to affect prices for coated paper and containerboard in the second half of 2001. High levels of coated paper imports are also expected to continue as a result of the strength of the U.S. dollar relative to foreign currencies. To better match production with demand, Mead expects to take 15,000 tons of market-related downtime in corrugating medium in the second half. Mead also plans to reduce coated paper production in the second half by 50,000 to 55,000 tons to bring inventories to appropriate levels.
Mead's second quarter earnings release conference call is scheduled for today at 10:15 a.m. (EDT) and is accessible through the company's web site. To listen to the call, go to www.mead.com and click on Conference Calls under the Financial Information banner. The call will be available live and stored on the web site for three months.
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