RICHMOND, Va. April 30, 2008 -- MeadWestvaco Corporation today reported a first quarter 2008 loss from continuing operations of $8 million, or $0.04 per share. Included in the results from continuing operations are after-tax restructuring charges of $5 million, or $0.03 per share, primarily related to employee separation costs and facility closures, and after-tax bad-debt charges of $5 million, or $0.03 per share, related to two customer bankruptcies. Also included in the results from continuing operations is an after-tax gain of $6 million, or $0.04 per share, from the recognition of a curtailment gain associated with the company's U.S. pension plan due to employee reductions from the company's cost initiative. Sales from continuing operations in the first quarter of 2008 were $1.52 billion, an increase of 6 percent, compared to sales from continuing operations of $1.43 billion in the first quarter of 2007.
First quarter 2008 total profit from continuing operations from the company's business segments was $50 million compared to $65 million in the prior year. In 2008, strong sales in targeted global packaging markets, higher price realizations, particularly in the mill business, stronger Specialty Chemicals segment earnings and foreign exchange benefits were more than offset by increased costs for energy, raw materials and freight across all businesses, expenses associated with a planned major mill outage and volume declines in global media.
"We generated strong growth and good business momentum in many of our global packaging markets; however, input cost inflation continues to negatively impact our results," said John A. Luke, Jr., chairman and chief executive officer. "We are overcoming these challenges by continuing to execute our profitable growth strategies focused on innovative products, growth in emerging markets and productivity improvement. Our leadership in growing global packaging markets and our diversified mix of businesses position us to profitably grow our company in the face of challenging economic conditions."
In the first quarter of 2007, MWV reported a loss from continuing operations of $23 million, or $0.13 per share. Included in the results from continuing operations for 2007 are after-tax restructuring charges of $10 million, or $0.06 per share, primarily related to employee separation costs and facility closures, and after-tax one-time costs of $3 million, or $0.02 per share in connection with the company's cost initiative.
On April 7, 2008, MWV entered into an agreement to sell its North Charleston, South Carolina, kraft paper mill and related assets to KapStone Paper and Packaging Corporation for $485 million. The sale is expected to close in the third quarter of 2008, resulting in a modest gain. For the first quarters of 2008 and 2007, the company is reporting the operating results of the North Charleston mill and related assets as a discontinued operation for accounting purposes. The results of the North Charleston mill were previously included in the Packaging Resources segment. Results from discontinued operations were after-tax income of $4 million, or $0.02 per share, in the first quarter of 2008 compared to after-tax income of $7 million, or $0.04 per share, in the first quarter of 2007.
In the Packaging Resources business, segment profit from continuing operations in the first quarter of 2008 was $32 million compared to $43 million in 2007. Sales from continuing operations in the first quarter of 2008 increased 8 percent to $631 million from $586 million in 2007. Volume growth and improved pricing offset higher costs for energy, wood, raw materials and freight. Segment profit in the quarter was lower due to costs associated with the planned Mahrt mill outage and to other inflationary effects. Shipments grew in targeted higher-value grades for beverage, liquid packaging and commercial print markets, and pricing increased across major paperboard grades. Rigesa, the company's Brazilian operation, posted strong quarterly sales and earnings growth, reflecting continued solid demand for value-added corrugated packaging solutions in the domestic Brazilian market.
In the Consumer Solutions business, segment profit in the first quarter of 2008 was $9 million compared to $20 million in 2007. Sales in the first quarter of 2008 increased 7 percent to $606 million from $566 million in 2007. Sales growth in the global beverage, home and garden, and personal care businesses, as well as improved productivity and favorable currency effects, were more than offset by higher costs for energy, raw materials and freight, market-related volume declines in global media packaging, and an unfavorable mix in U.S. personal care packaging. The media business also recorded a $5 million bad-debt charge related to the bankruptcy of a European customer.
Sales in the U.S. were unchanged as gains in the home and garden market and solid performance in the beverage market were offset by lower volume in media and an unfavorable mix in the personal care business. In the home and garden business, good momentum continued with major customers, including SC Johnson, Procter & Gamble and Scott's Miracle-Gro, and the company won new business with Clorox for their Green Works product line.
Sales outside the U.S. grew 13 percent driven by gains in the beverage, personal care, tobacco, and home and garden packaging businesses. In the beverage packaging business, the company won new business with Scottish Courage and continued to grow business with top-10 customers. Personal care's growth was helped by new business with Swedish cosmetics company Oriflame and by growing demand for Keltec's innovative airless and foamer products with global personal care customers.
Consumer & Office Products
In the Consumer & Office Products business, segment profit in the first quarter of 2008 was a loss of $3 million compared to a loss of $2 million in 2007. Sales in the first quarter of 2008 increased 3 percent to $208 million from $201 million in 2007. Overall improved mix from a continued focus on value-added products, enhanced manufacturing productivity and a solid back-to-school season in Tilibra, the segment's Brazilian business, were slightly offset by volume declines related to the segment's focus on proprietary products, higher costs for raw materials, principally uncoated paper, and a $3 million bad-debt charge related to the bankruptcy of a customer in Brazil. This segment continues to be impacted by Asian-based imported products.
In the Specialty Chemicals business, segment profit in the first quarter of 2008 was $12 million compared to $4 million in 2007. Sales in the first quarter of 2008 increased 11 percent to $124 million from $112 million in 2007. Relative to a weak first quarter in 2007, sales and earnings improved across all major lines of business and were driven by improved pricing, product mix and productivity that offset higher raw material costs. Overall demand for pine chemicals was strong, especially in industrial markets for agricultural, paper and petroleum applications. This segment also experienced solid non-automotive carbon growth in purification markets.
Corporate and Other
Corporate and Other loss was $73 million in the first quarter of 2008 compared to a $92 million loss in 2007. Improvement in 2008 was driven by a pension plan curtailment gain of $10 million in 2008, lower restructuring charges and one-time costs of $13 million in 2008 compared to 2007, and higher profits from land sales of $3 million over 2007.
In the first quarter of 2008, pre-tax costs for energy, wood, raw materials and freight increased $39 million over the prior-year quarter on a continuing operations basis.
In the first quarter of 2008, the pre-tax impact from favorable foreign exchange was $10 million higher compared to the first quarter of 2007 on a continuing operations basis.
Cash flow provided by continuing operations was about $35 million in the first quarter of 2008. Cash flows in 2008 reflect lower operating earnings, higher tax payments, inventory build for the back-to-school season in the Consumer & Office Products segment, and a higher level of receivables due to increased sales compared to 2007.
Capital spending by continuing operations was $64 million in the first quarter of 2008 compared to $62 million in the first quarter of 2007.
In the first quarter of 2008, the tax benefit attributable to the loss from continuing operations had an effective rate of approximately 65 percent. The effective rate differed from statutory rates due primarily to a favorable resolution of a prior tax matter in the quarter. The annual effective tax rate for 2008 is estimated to be about 28 percent.
MWV paid a regular quarterly dividend of $0.23 during the first quarter, and on April 28, 2008, declared a quarterly dividend payable on June 2, 2008, to stockholders of record at the close of business on May 8, 2008.
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