Mead Reports Fourth Quarter Results, Net Loss of $25 Million
Press release from the issuing company
DAYTON, Ohio, Jan. 18 - The Mead Corporation announced a net loss of $25.9 million or 26 cents per share in the fourth quarter of 2001, compared to net earnings of $16.7 million or 17 cents per share for the same period in 2000. Excluding the impact of special items, fourth quarter 2001 earnings were $1.0 million or 1 cent per share versus $18.7 million or 19 cents per share for the prior year quarter. Fourth quarter 2001 special items included a pretax charge of $41.7 million or 27 cents per share loss due to the previously announced sale of assets and related paper machine shutdown at the Devon Valley mill, the sale of Gilbert Paper and related mill closure, costs associated with the proposed merger with Westvaco Corporation and other charges. Fourth quarter 2001 sales were $0.93 billion compared to $1.04 billion in 2000.
For the year, the company reported a net loss of $22.7 million or 23 cents per share versus net earnings of $161.2 million or $1.58 per share for 2000. Excluding the impact of special items, earnings were $16.1 million or 16 cents per share in 2001 compared to $169.7 million or $1.66 per share the previous year. Special items for the year included a $10.4 million after-tax charge for accounting changes related to the initial adoption of Statement of Financial Accounting Standards No. 133, $39.5 million pretax charges associated with sales and shutdowns, and $4.8 million pretax charges for costs related to the proposed merger with Westvaco Corporation. Sales were $4.2 billion in 2001 compared to $4.4 billion for 2000.
"In 2001, our operating results for the fourth quarter and the full year reflect extremely weak market conditions in coated paper and containerboard,'' said Jerry Tatar, Mead chairman, president and chief executive officer. "The continued economic slowdown led to lower selling prices and to our decisions to take production downtime. Our coated paperboard system, which includes our international beverage packaging business, performed well in these difficult markets, although results continued to be affected by the negative impact of the strong U.S. dollar. Our consumer and office products business had its best year ever. The business recorded a solid performance for school supplies and time management products and benefited from greater operating efficiencies achieved in its converting and distribution system.''
Tatar added, "As we look toward the future, the proposed merger with Westvaco Corporation brings new opportunities. We are focused on maximizing the potential of both organizations and excited about the new enterprise. Together, this combination makes compelling strategic sense.''
On January 28, 2002, Mead will hold a special meeting of shareholders for the purpose of considering the merger.
Paper segment results were a loss of $55.7 million in the fourth quarter of 2001, compared to earnings of $28.9 million in the prior-year quarter. Fourth quarter results included $38.5 million in special items related to the sale or closure of facilities. In the quarter, Mead sold its Gilbert Paper business. The sale and related mill closure resulted in a pretax charge of $24.2 million. Mead also had a pretax charge of $14.3 million for actions taken at the company's European specialty paper mill.
Fourth quarter sales were $399.2 million in 2001, down from $493.6 million in 2000. Sales and earnings results were lower than the fourth quarter a year ago due to a decline in coated paper prices and costs associated with market- related downtime. During the quarter, Mead took approximately 56,000 tons of coated paper out of production. As a result of the market-related downtime, coated paper inventories were lower at year-end 2001 compared to year-end 2000.
For the full year, the Paper segment had a loss of $76.5 million compared to earnings of $181.9 million in 2000. Excluding pretax charges related to special items of $38.5 million, the Paper segment's loss was $38.0 million for the year. Sales were $1.78 billion in 2001, down from $1.93 billion in 2000. Prices for coated paper declined 7% in 2001 from the prior year. Lower average coated paper prices, costs associated with market downtime and higher operating costs led to the full-year segment loss.
Packaging and Paperboard
The Packaging and Paperboard segment's fourth quarter 2001 earnings were $25.1 million compared to $25.6 million in the same period in 2000. Fourth quarter 2000 earnings included the impact of a $2.3 million special item related to the closure of a container plant. Sales were $352.8 million in the fourth quarter of 2001, compared to $373.9 million for the prior year quarter.
In the quarter, the segment's earnings were affected by poor market conditions for the Containerboard business, with weaker demand for corrugating medium leading to lower selling prices. In line with these market conditions, the Stevenson, Alabama, corrugating medium mill took 18,000 tons of downtime. In Mead's coated board system, sales of beverage packaging were consistent with the levels of the fourth quarter of the prior year.
For the full year, earnings were $119.7 million in 2001, down from $174.0 million in 2000. Sales for the segment were $1.52 billion in 2001 versus $1.61 billion in 2000. Sales and earnings were lower versus the prior year due to a 13% decline in selling prices for corrugating medium and the impact of the strong U.S. dollar on the international packaging business. Lower demand and prices for the solid wood products business also affected the segment's earnings.
Consumer and Office Products
The Consumer and Office Products segment sales in the fourth quarter were $182.9 million compared to $177.4 million in 2000. Earnings in the fourth quarter of 2001 were $9.7 million compared to $11.8 million in the same period in 2000. Earnings in both quarters included the impact of costs of approximately $1 million related to the shutdown of facilities.
For the full year, sales increased to $875.7 million from $829.4 million in 2000. The segment's full year earnings improved to $85.8 million from $61.7 million in 2000. Earnings include special items in both years related to the sale or closing of facilities, amounting to charges of $1 million in 2001 and $6.1 million in 2000. The increase in earnings was a result of higher operating efficiencies achieved through consolidating facilities, realignment of the organization, divestiture of under-performing assets and growth in international business in Canada and Mexico.
Mead's share of investees' earnings was $0.9 million in the fourth quarter of 2001 compared to $1.3 million for the same period in 2000. For the full year, Mead's share of earnings was $6.0 million in 2001 and $10.8 million in 2000. The declines for the quarter and year resulted from lower prices for oriented strand board.
Capital expenditures totaled $202 million during 2001, representing approximately 72% of annual depreciation and depletion for year-end 2001. Mead repurchased 256,200 common shares during 2001. At year-end 2001, Mead had 99.1 million common shares outstanding versus 98.9 million at the close of 2000.
Mead's income tax rates for the fourth quarter and full year were favorable to the statutory tax rate which led to a larger than normal tax benefit. The benefit of approximately $11 million was primarily a result of a one-time tax savings for 2001 on certain international sales.
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