Smurfit-Stone Container Posts Fourth Quarter Loss
Jan. 25, 2006 (Press Release) - Smurfit-Stone Container Corp. today reported a net loss available to common stockholders of $92 million, or $0.36 per diluted share, for the fourth quarter of 2005. These results include:
- Previously announced litigation settlement charges of $36 million pre-tax, or $0.09 per diluted share,
- Restructuring charges of $24 million pre-tax, or $0.06 per diluted share, related to facility closures,
- A gain of $8 million pre-tax, or $0.02 per diluted share, associated with revisions to certain employee benefit programs,
- A $0.01 per diluted share gain to record the impact of a non-cash foreign currency translation adjustment, and
- A tax benefit of $10 million, or $0.04 per diluted share, related to:
- A $34 million tax provision for the repatriation of foreign earnings under the American Jobs Creation Act, and
- A $44 million reduction to deferred taxes due principally to the favorable resolution of the Internal Revenue Service examination for the years 2002 and 2003.
Fourth quarter 2005 results compare to a net loss available to common stockholders of $9 million, or $0.04 per diluted share, for the fourth quarter of 2004. That quarter included an impairment charge of $0.19 per diluted share, a loss from the early extinguishment of debt of $0.03 per diluted share, a non-cash foreign currency translation loss of $0.03 per diluted share, and a tax benefit related to the resolution of certain tax matters of $0.04 per diluted share.
For the full year 2005, the company reported a net loss available to common stockholders of $339 million, or $1.33 per diluted share, compared to a net loss available to common stockholders of $57 million, or $0.23 per diluted share, in 2004.
Fourth quarter sales were $2,047 million, down five percent from the fourth quarter of 2004. Sales for the full year were $8.4 billion, compared to $8.3 billion in 2004.
Commenting on operating results, Patrick J. Moore, chairman, president and chief executive officer, said, “Market conditions were unfavorable in the first half of 2005 resulting in declining containerboard and corrugated prices. Our average box prices bottomed out in the fourth quarter reflecting decreases in the published containerboard price index earlier in the year. While we contended with higher energy, transportation and fiber costs throughout 2005, the impact was most pronounced in the fourth quarter following recent spikes in energy prices and the impact of hurricanes in the Southeast. Despite unfavorable operating results, the momentum did change in the quarter as market conditions began to improve.”
The containerboard and corrugated containers segment reported an operating loss of $5 million in the fourth quarter 2005 compared to operating profit of $31 million in the third quarter and $126 million in the prior year period. Operating profit for fiscal year 2005 was $183 million compared to $314 million in 2004. Lower containerboard production, declining containerboard and corrugated container prices and inflationary cost pressures drove lower operating results for both the fourth quarter and full year 2005.
The consumer packaging segment’s fourth quarter 2005 operating profit of $20 million improved $3 million from the prior year, while down $5 million sequentially. Full year 2005 operating profit of $83 million was up $2 million compared to 2004. Folding carton shipments during the fourth quarter and full year 2005 were essentially flat with the prior year while prices continued to steadily improve. The business made solid progress with cost reduction efforts despite inflationary cost pressures.
Total debt at year-end 2005 was $4,571 million, up $73 million from the prior year.
Commenting on the company’s outlook, Moore said, “Market conditions have finally begun to improve. Packaging demand has rebounded, our inventories are at their lowest level in years, and we are implementing previously announced price increases and cost reduction initiatives. These conditions should lead to better comparisons as we move through the year; however, we do not expect meaningful sequential earnings improvement in the first quarter of 2006 due to seasonally lower volume, continued inflationary cost pressures, and the timing of certain employee benefit costs.
“The company faces critical challenges and opportunities as a result of dramatic shifts in the market that call for a profound change at Smurfit-Stone. We recently announced key strategic initiatives to address market realities and are fully engaged in executing this plan. These initiatives include changes in key operating management positions, actions to drive lower costs in our manufacturing system and achieve specific cost and performance targets, and kicking off a customer-focused approach to the marketplace that should provide the foundation for long-term improvement in our results.”
SOURCE: Smurfit-Stone Container Corp.