Westvaco Reports Fourth Quarter And Full Year Earnings
Press release from the issuing company
STAMFORD, CT, November 20, 2001 -- Westvaco Corporation (NYSE: W) today reported earnings before non-recurring items for the fiscal fourth quarter of $36.3 million ($.36 per share) and fiscal 2001 earnings of $109.6 million ($1.09 per share). Earnings for the quarter included a non-recurring tax benefit of $.05 per share, due primarily to the resolution of prior year tax audits, and a $53.7 million pretax restructuring charge, equal to $.33 per share. Reported net earnings for the quarter were $8.4 million ($.08 per share) and for the full year $88.2 million ($.87 per share).
Fourth quarter 2001 sales were $1.0 billion compared to $1.1 billion in the fourth quarter of 2000. Sales for the full year ended on October 31, 2001 were $3.94 billion versus $3.86 billion for fiscal 2000. For the fiscal 2000 fourth quarter, earnings before non-recurring items were $78.9 million ($.78 per share) and for the full fiscal year 2000 $262.2 million ($2.60 per share). Reported net earnings for the fourth quarter 2000 were $80.7 million ($.80 per share) and for the full year 2000 $245.9 million ($2.44 per share).
The company's overall fourth quarter performance reflects lower demand and prices for paper and paperboard due to global economic weakness, as well as energy costs that were higher than year-ago levels. Demand for coated printing papers also continued to be affected by the strength of the U.S. dollar, which made imported papers more competitive.
Several of the company's businesses performed well during the quarter, including the export portion of bleached paperboard sales and the company's specialty chemicals business, which both posted improved results compared to the fourth quarter of 2000. Westvaco's ongoing program to divest non-strategic timberlands resulted in a fourth quarter pretax gain of $21.4 million, or $13.3 million ($.13 cents per share) after tax. For all of fiscal 2001 pretax gains from land sales totaled $34.7 million, or $21.5 million ($.21 cents per share) after tax.
On August 29, Westvaco and The Mead Corporation announced a merger of equals that will create a global enterprise with leading positions in packaging, coated and specialty papers, consumer and office products, and specialty chemicals. The companies are making rapid progress toward completing the merger.
"As we prepare for our planned merger with Mead, we are highly focused on developing rigorous programs to achieve $325 million in synergies that we have targeted within two years," said John A. Luke, Jr., Chairman and CEO. "We are intent on generating higher earnings and higher returns on capital by building on the strong - and in many cases complementary - businesses of Mead and Westvaco."
The fourth quarter pretax charge of $53.7 million primarily reflects the closing of a paper mill in Tyrone, PA, and packaging plants in Richmond, VA, and Memphis, TN. Restructuring actions taken in the fourth quarter will result in annual pretax savings of about $50 million. In addition, earnings for the quarter reflect the effect of market related downtime that was partially offset by a LIFO (last in-first out) credit. Energy prices in the quarter were about seven percent higher than during the same period last year and reduced earnings by $.02 per share compared to the fourth quarter of 2000.
In Westvaco's packaging segment, fourth quarter 2001 operating profit totaled $35.0 million, down from $112.9 million in the fourth quarter of 2000. Segment sales totaled $626 million, compared to $669 million in the fourth quarter of 2000. During the quarter, shipments and prices remained generally stable for bleached paperboard sold for high-value applications such as aseptic and pharmaceutical packaging. In more competitive bleached paperboard markets, prices and shipments declined. Bleached paperboard shipments were also reduced by unexpected and temporary manufacturing difficulties at the company's mill in Evadale, TX. Results for the company's mill in Charleston, SC, were weaker due to lower linerboard prices and reduced demand for saturating kraft paper in global markets. Overall, production at the company's U.S. paperboard mills was reduced by 70,000 tons due to downtime taken for market-related reasons and the manufacturing interruption at Evadale. The company's Brazilian packaging business, Rigesa, Ltda., experienced decreased sales and profits due to that country's weakening economy and currency. Despite these challenges, Rigesa's return on capital employed was strong.
In consumer packaging, the company's European operations improved compared to the fourth quarter of 2000, reflecting improvement in entertainment packaging and the acquisition earlier this year of Alfred Wall AG. U.S. markets for DVD and CD packaging, where demand was slower than usual during August and September, saw better than normal seasonal strengthening during the month of October.
In the paper segment, which includes the company's envelope business, fourth quarter operating profit was $13.4 million, compared to $37.6 million in the fourth quarter of 2000. Sales totaled $275 million compared to $313 million in the fourth quarter a year earlier. Segment results reflect weaker market conditions, especially in September and October, as many end-users postponed or cancelled major printing projects. Fourth quarter results also reflect market-related downtime of about 10,000 tons at the company's Luke, MD, and Wickliffe, KY, mills and competition from imports due to the continuing strength of the U.S. dollar.
In the chemical segment, fourth quarter operating profit totaled $19.0 million compared to $17.0 million in the fourth quarter of 2000. Sales totaled $89 million compared to $94 million in the fourth quarter a year earlier. Despite declining sales, segment performance improved because of greater operating efficiency. Sales of ink resins remained strong, and results for the activated carbon business remained stable, reflecting the success of the auto industry's sales promotions.
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