MeadWestvaco Reports Q4 Income: $50M on $1.89B Sales
Press release from the issuing company
STAMFORD, Conn., Jan. 29 -- MeadWestvaco Corporation today reported fourth quarter net income of $50 million, or 25 cents per share, on sales of $1.95 billion. For the fourth quarter of 2002, the company reported net income of $36 million, or 18 cents per share, on sales of $1.89 billion, and for the third quarter 2003, net income of $27 million, or 14 cents per share, with sales of $2 billion.
"In a very difficult environment, we continue to deliver on our strategic commitments," said John A. Luke, Jr., chairman and chief executive officer. "This past year, we produced synergy savings beyond our $360 million goal, accelerated forestland sales and held firm on capital expenditures. While we remain focused on improving our mill-based packaging businesses, our higher value consumer packaging and packaging systems businesses continued to perform well, and the operating leverage we have achieved in coated papers is now evident."
In December, MeadWestvaco announced a $500-million productivity initiative for 2004 and 2005, combining improvements in operating earnings and cash flow. "While there are early signs of continued economic improvement in 2004, we are not waiting for this to happen to improve our performance. Our productivity initiative, along with continued operating and fiscal discipline, will help us achieve our goal of improving shareholder returns," Mr. Luke said.
MeadWestvaco will pay a regular quarterly dividend of 23 cents per common share for the quarter, representing an annualized dividend rate of 92 cents per common share.
For the full year 2003, sales were $7.55 billion, up from $7.24 billion in 2002. The company reported a net loss of $6 million, or 3 cents per share, for 2003 compared with a net loss of $389 million, or $2.02 per share, in the prior year. In 2003, the net loss included the cumulative effect of an accounting change of $4 million, or 2 cents per share. The net loss in 2002 included the cumulative effect of an accounting change of $352 million and a loss from discontinued operations of $34 million.
Fourth quarter 2003 net earnings included a pretax gain of $37 million, or 12 cents per share, from the sale of 671,000 acres of forestland on gross proceeds of $182 million. This gain included the sale of 629,000 acres of forestland in New England for proceeds of $135 million. The quarter's net earnings also included $15 million, or 5 cents per share, in restructuring charges related to the company's productivity initiative, and gains of $12 million, or 4 cents per share, on insurance settlements. For fourth quarter 2002, net earnings of 18 cents per share included 21 cents per share in gains on the $85 million in proceeds from the sale of 126,000 acres of forestland, 11 cents per share of restructuring and merger-related charges, a loss from discontinued operations of 3 cents per share, and a 2-cent per share charge related to the early retirement of debt.
During the fourth quarter, the company sold its investment in convertible debentures for a pretax gain of $5 million. In addition, the company recorded a 93% tax benefit rate for the year compared to a 5% rate recorded through the first three quarters of 2003. The change in the tax rate favorably affected fourth quarter earnings and was substantially the result of changes in income levels at the company's domestic operations.
Energy and wood costs increased a total of $10 million compared to fourth quarter 2002. Fourth quarter pension income was $15 million before taxes, and $70 million for the year compared to $124 million for 2002. Capital expenditures for the full year 2003 totaled $393 million, an amount well below the company's annual level of depreciation.
Results for 2002 described in this release include only 11 months of the former Mead Corporation as a result of the timing of the merger.
While early signs of improvement are evident, the first quarter tends to be seasonally weak, particularly in consumer and office products. Coated paper pricing is anticipated to be below 2003 levels. The company expects to take approximately 32,000 tons of market-related downtime in coated papers, 8,000 tons in carbonless paper and 26,000 tons in bleached board during the quarter. Higher wood and energy costs are expected to continue to affect results in 2004. In 2004, prudent capital spending levels will be maintained well below the level of depreciation, and the company's productivity initiative will focus efforts on improving operating earnings and cash flow.
In Packaging, the company's largest business segment, operating profit for the fourth quarter was $57 million, down from $110 million in the 2002 fourth quarter and $70 million in the third quarter of 2003. Packaging sales were $1.03 billion in the fourth quarter of 2003, compared with $1 billion in the fourth quarter of 2002 and $1.02 billion in the third quarter of 2003. The segment results benefited from favorable exchange rates which totaled approximately $7 million more in the fourth quarter compared to the prior year. The decrease in operating profit in the quarter was primarily due to weaker results in the mills. Despite good performance in Coated Natural Kraft paperboard, overall the segment experienced higher costs associated with operations, market-related downtime, energy and wood, and the impact of lower shipments. During the quarter, the company took downtime equal to 58,000 tons of bleached board, compared to no market-related downtime taken in last year's fourth quarter.
Results in consumer packaging improved over the fourth quarter 2002 due to improved sales of media packaging and overall product mix enhancement. Performance of the beverage packaging systems business also improved due to favorable exchange rates, along with sales growth in North America and Latin America partly offset by reduced volume in European sales. Rigesa, Ltda., the company's Brazilian subsidiary, performed better than the previous year due to increased sales volume and higher prices.
The Packaging segment's full year operating profit was $267 million, down from $316 million in 2002. Sales for the full year 2003 were $4 billion, compared to prior year sales of $3.7 billion. Lower shipments of bleached and unbleached paperboard and higher costs related to market downtime, energy, wood and mill operations for the year offset improved sales revenue in consumer packaging, packaging systems, Coated Natural Kraft paperboard and Rigesa.
The Papers segment recorded a quarterly operating loss of $6 million, an improvement from the prior year loss of $11 million and down from the prior quarter operating profit of $19 million. Segment sales were $555 million, compared to sales of $553 million in the fourth quarter of 2002 and $571 million for the third quarter 2003. Improved mill operating performance and cost efficiencies helped offset the effects of lower selling prices for coated papers and higher costs for market-related downtime, energy and wood. In addition, the company's panelboard investee contributed $10 million more in the quarter compared to 2002 based on higher selling prices for panelboard. Coated paper sales volumes improved over fourth quarter 2002, while carbonless sales volumes remained stable. To control inventories, the company took 32,000 tons of coated paper and 8,000 tons of carbonless paper market-related downtime during the quarter; by comparison, no market-related downtime was taken in the segment in fourth quarter 2002.
For the full year, the Paper segment recorded a loss of $45 million, an improvement over the prior year loss of $71 million. Segment sales for the full year were $2.13 billion, compared to prior year sales of $2.10 billion. Operating results for the segment improved primarily due to significant cost reductions and higher income from the company's panelboard investee, which were offset in part by lower selling prices, slightly lower shipments and higher costs for energy and wood.
Consumer and Office Products
The Consumer and Office Products segment recorded a quarterly operating profit of $33 million compared to prior year operating profit of $32 million and a profit of $48 million in the third quarter of 2003. Segment sales were $261 million compared to prior year fourth quarter sales of $247 million and third quarter 2003 sales of $323 million. Seasonally a strong quarter for sales of time management products, fourth quarter profit was up slightly from last year with the addition of AMCAL products and the recently acquired Day Runner brand products helping to offset some weakness in the consumer and office products market.
For the full year, the Consumer and Office Products segment profit was $126 million; 2002 profit was $131 million. Consumer and Office Products segment sales totaled $1.05 billion, the same as in 2002.
In the Specialty Chemicals segment, fourth quarter operating profit was $11 million, down slightly from the prior year fourth quarter profit of $12 million and third quarter operating profit of $16 million. Segment sales for the fourth quarter were $92 million, compared to prior year revenue of $83 million and third quarter revenue of $93 million. The effect of higher sales volume was more than offset by increases in energy and freight costs.
Full year segment results were a profit of $45 million compared to a prior year profit of $57 million. Specialty Chemicals segment sales for the full year were $352 million, with prior year sales of $343 million. Sales growth in automotive carbon and asphalt products offset weaker markets and lower pricing in printing inks and industrial products.
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