MeadWestvaco Reports Improved in Fourth Quarter Income
Jan. 26, 2006 (Press Release) - MeadWestvaco Corp. today reported fourth quarter net income of $62 million, or $0.34 per share. These results included after-tax restructuring charges of $3 million, or $0.02 per share, and after-tax gains on forestland sales of $2 million, or $0.01 per share. Sales revenue in the fourth quarter was $1.6 billion.
Income from continuing operations improved over the fourth quarter of 2004, despite a significant increase in cost inflation for energy, raw materials and transportation, as a result of higher selling prices, lower general and administrative costs, lower restructuring charges, lower interest expense and a lower effective tax rate.
"Markets for the company's products remained stable during the quarter, although well below the robust levels of 2004," said John A. Luke, Jr., chairman and chief executive officer. "We realized higher selling prices across most of our businesses during the quarter as we continued to combat inflation in energy and raw material costs and the ripple effects from the Gulf Coast hurricanes.
"As we focus on building our global leadership position in packaging and packaging solutions, we are aggressively driving our cost initiative forward in order to establish a more flexible, lean and responsive business model," continued Mr. Luke. "Clearly, with an annual run rate savings of about $65 million from our cost initiative, we are beginning to see the tangible results and benefits of this program. We are well positioned for success as we work toward expanding in key growth markets."
Quarter and Full-year Comparisons
In the fourth quarter of 2005, the company reported income from continuing operations of $60 million, or $0.33 per share, and income from discontinued operations of $2 million, or $0.01 per share. These results included after-tax restructuring charges of $3 million, or $0.02 per share, and after-tax gains on forestland sales of $2 million, or $0.01 per share. Sales revenue in the quarter was $1.6 billion. In the fourth quarter of 2004, the company reported a net loss of $499 million, or $2.43 per share, which included an after-tax loss on discontinued operations of $541 million, or $2.63 per share. Income from continuing operations for the fourth quarter of 2004 was $42 million, or $0.20 per share. Results in the fourth quarter of 2004 included after-tax restructuring charges of $23 million, or $0.11 per share, and after-tax gains on the sale of forestland of $17 million, or $0.08 per share. Sales revenue in the fourth quarter of 2004 was $1.6 billion.
For the full year of 2005, sales from continuing operations were $6.2 billion. Sales from continuing operations exclude 2005 revenue from the company's printing and writing papers business, which was sold in the second quarter of 2005. Net income for 2005 was $28 million, or $0.14 per share, including an after-tax loss from discontinued operations of $91 million, or $0.48 per share; after-tax debt retirement charges of $56 million, or $0.29 per share; after-tax restructuring charges of $20 million, or $0.10 per share; and after-tax gains of $37 million on the sale of forestlands, or $0.19 per share. Income from continuing operations for the full year of 2005 was $119 million, or $0.62 per share.
For the full year of 2004, the company reported a net loss of $349 million, or $1.72 per share. The net loss for 2004 includes an after-tax loss from discontinued operations of $573 million, or $2.82 per share, associated with the sale of the printing and writing papers business; after-tax restructuring charges of $67 million, or $0.33 per share; and after-tax gains on the sale of forestlands of $110 million, or $0.54 per share. Income from continuing operations for the full year of 2004 was $224 million, or $1.10 per share.
In its Packaging business, the company's largest segment, operating profit in the fourth quarter was $77 million compared to $118 million for the same period of 2004. Sales revenue of $1.2 billion was similar to the fourth quarter of 2004. The decline was due to higher raw material and energy costs, lower shipment and production levels in bleached paperboard due in part to the lingering effects of the hurricanes and the impact of market-related downtime. In consumer packaging, declines in the media markets, compared to a strong fourth quarter in 2004, offset growth in markets for cosmetics, healthcare and tobacco.
The Packaging segment's full year 2005 operating profit was $336 million compared to $431 million in 2004. Sales for the full year were $4.5 billion, compared to $4.4 billion in the prior year.
Consumer & Office Products
In the Consumer & Office Products segment, quarterly operating profit was $59 million, an increase of 18% from $50 million in the prior year. Sales revenue of $328 million increased 8% from $303 million in the prior year. The increase in operating profit reflects growth in the Brazilian school and office products business acquired in the third quarter of 2004, cost savings from actions taken in prior years to consolidate facilities, improved sales mix and higher selling prices. The effect of these improvements was offset in part by higher input costs, primarily costs for uncoated paper and freight.
The Consumer & Office Products segment full year 2005 operating profit was $130 million, compared to $137 million in 2004. Sales in 2005 were $1.1 billion up slightly from 2004.
In the Specialty Chemicals segment, quarterly operating profit was $6 million compared to $11 million in the prior year. Sales revenue for the segment was $107 million, down slightly from $109 million in the fourth quarter of 2004. The positive effect of higher selling prices was more than offset by higher raw material costs, especially for crude tall oil, and by higher energy costs.
The Specialty Chemicals segment full year 2005 operating profit was $39 million compared to $57 million in 2004. Sales in 2005 were $425 million, compared to $410 million in 2004.
The company expects its markets overall to remain stable in the first quarter of 2006, although at a more moderate level than during the first quarter of 2005. The first quarter of the year is a seasonally weak period for the Consumer & Office Products business and for some of the company's packaging markets. The company expects to continue to implement higher selling prices based on previously announced price increases in an effort to offset ongoing pressures from cost inflation in energy and raw materials.
During the fourth quarter of 2005, prices for energy, raw materials and freight increased by approximately $50 million compared to prior year.
The 2005 full year effective tax rate was 12% compared to 31% for 2004. The decline in the rate is due to a lower proportion of domestic earnings in 2005, a change in the allocation of state taxes as a result of the sale of the printing and writing paper business and tax credits.
For the full year of 2005, operating cash flow from continuing operations was approximately $300 million, which included a tax payment of approximately $160 million related to the divestiture of the printing and writing papers business. Capital spending was $305 million in 2005, a rate well below annual depreciation.
During 2005, the company repurchased a total of 24.2 million shares, or 12% of the shares outstanding as of May 2005, using proceeds from the sale of the printing and writing papers business. The company has been authorized by the Board of Directors to repurchase up to 5 million additional shares, primarily to avoid dilution of earnings per share relating to the exercise of employee stock options. At the end of 2005, the number of actual shares outstanding was 181.4 million, compared to 203.9 million shares at the end of 2004.
During 2005, the company reduced its total debt by $1.2 billion, and improved total debt to total capital ratio to 41.1% at December 31, 2005 compared to 45.9% at December 31, 2004.
During the fourth quarter of 2005, pension income before settlements and curtailments was $16 million, compared to $21 million during the fourth quarter of 2004. For the full year of 2005, pension income was $67 million, compared to $86 million for the full year of 2004.
MeadWestvaco paid a regular quarterly dividend of 23 cents per share during the quarter and, on January 24, 2006, declared a quarterly dividend payable March 1, 2006, to stockholders of record at the close of business on February 3, 2006. For the full year 2005, the company paid out $178 million in dividends to shareowners.
MeadWestvaco, headquartered in Stamford, Conn., is a global packaging company that delivers high-value packaging solutions and products to the world's most recognized companies in the food and beverage, media and entertainment, personal care, cosmetic and healthcare industries. The company also has market-leading positions in its Consumer & Office Products, Specialty Chemicals and Specialty Papers businesses. MeadWestvaco, with operations in more than 29 countries, has been selected for the Dow Jones Sustainability Indexes, and manages all of its forestlands in accordance with internationally recognized forest certification standards.
SOURCE: MeadWestvaco Corp.