MeadWestvaco Reports 1st Quarter Profit
April 20, 2006 (Press Release) - MeadWestvaco Corp. today reported
first quarter net income of $3 million, or $0.02 per share. These
results included after-tax restructuring charges of $2 million, or
$0.01 per share, and after-tax gains on forestland sales of $2
million, or $0.01 per share. Sales revenue in the first quarter was
$1.43 billion, an increase of 4.4% compared to sales revenue of $1.37
billion in the first quarter of 2005.
Income from continuing operations declined from 2005 due mainly to
significant increases in energy, raw materials and freight, and lower
gains on forestland sales, which more than offset higher selling
prices, a lower effective tax rate and lower interest expense.
"Seasonal markets for our products were firmer in the first
quarter, which typically is a slower period for MeadWestvaco," said
John A. Luke, Jr., chairman and chief executive officer.
"Our continued efforts to increase pricing to combat inflation in
energy and raw materials contributed positively to our results, as did
our continuing progress on the company's cost initiative to reduce our
general and administrative expenses.
"During the quarter, we strengthened our packaging platform by
aligning our packaging businesses around key customers and global
markets," stated Luke. "By leveraging our full packaging capabilities
and by continuing to deliver on our cost initiative, we are
positioning our company to produce profitable growth and long-term
value for our shareholders."
In the first quarter of 2005, the company reported a net loss of
$6 million, or $0.03 per share, which included an after-tax loss from
discontinued operations of $23 million, or $0.11 per share. Income
from continuing operations was $17 million, or $0.08 per share.
Results in first quarter 2005 included restructuring charges of $3
million, or $0.01 per share, and an after-tax gain on forestland sales
of $25 million, or $0.12 per share.
MeadWestvaco expects that demand will remain steady across its
business segments and anticipates normal seasonal improvement during
the second quarter of 2006. The company plans to continue to seek
higher selling prices to offset input costs, which remain at levels
well-above the year-ago second quarter.
In its Packaging business, the company's largest segment,
operating profit in the first quarter was $60 million compared to $79
million for the same period of 2005. Sales revenue of $1.1 billion was
up 3% from the first quarter of 2005. Sales improved due to higher
pricing and shipments over the first quarter 2005; however, operating
profit for the segment was negatively affected by higher input costs
for energy and raw materials. Demand in paperboard packaging was firm,
with improvements in markets for liquid aseptic packaging and
commercial print. Paperboard production levels reflected capacity
reductions due to previously announced indefinite machine shutdowns at
the company's Covington, Virginia, and Evadale, Texas, mills. Compared
to the first quarter 2005, packaging demand improved in healthcare,
was stable for beverage, cosmetics, and personal care products, and
was weaker in media and entertainment packaging.
Consumer & Office Products
In the Consumer & Office Products segment, quarterly operating
loss was $5 million, a slight improvement from last year's loss of $6
million. Sales revenue of $195 million increased 7% from $183 million
in the prior year. The improvement in operating performance reflects
the impact of higher volume, improved product mix, and the
back-to-school season in the segment's Brazilian business. Overall the
segment continues to be challenged by higher material cost, especially
uncoated paper and by low-priced imported products.
In the Specialty Chemicals segment, quarterly operating profit was
$9 million compared to $4 million in the prior year. Sales revenue for
the segment was $114 million, up approximately 19% from $96 million in
the first quarter of 2005, reflecting the effects of higher selling
prices and volume growth. Growth was evident in markets for
performance chemicals used in asphalt, dyes and printing inks as well
as for activated carbon for automotive markets and corrosion
technology. Overall results continue to be affected by higher raw
material costs, especially for crude tall oil and petroleum-based
In the first quarter of 2006, prices for energy, raw materials and
freight were approximately $50 million higher than the prior year.
Cash flow from continuing operations was approximately $100
million during the first quarter, a solid improvement from cash
provided by continuing operations of $15 million for the same period
last year. Capital spending remained well below depreciation.
In the first quarter of 2006, the company began to expense stock
options in accordance with SFAS No. 123R, Share-Based Payments. The
effect of adoption of SFAS No. 123R was an incremental non-cash
expense of approximately $4 million in the quarter ended March 31,
2006, and the full year expense is currently estimated to be an
incremental non-cash expense of approximately $15 million before
The tax rate for 2006 is estimated to be approximately 17%. For
the first quarter of 2006, the company recorded a favorable tax
On March 1, 2006, MeadWestvaco paid a regular quarterly dividend
of $0.23 per share to stockholders of record at the close of business
on February 3, 2006.
MeadWestvaco 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. For more information, please visit
Certain statements in this document and elsewhere by management of
the company that are neither reported financial results nor other
historical information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
information includes, without limitation, the business outlook,
assessment of market conditions, anticipated financial and operating
results, strategies, future plans, contingencies and contemplated
transactions of the company. Such forward-looking statements are not
guarantees of future performance and are subject to known and unknown
risks, uncertainties and other factors which may cause or contribute
to actual results of company operations, or the performance or
achievements of each company, or industry results, to differ
materially from those expressed or implied by the forward-looking
statements. In addition to any such risks, uncertainties and other
factors discussed elsewhere herein, risks, uncertainties and other
factors that could cause or contribute to actual results differing
materially from those expressed or implied for the forward-looking
statements include, but are not limited to, events or circumstances
which affect the ability of MeadWestvaco to realize improvements in
operating earnings expected from the company's general and
administrative cost reduction initiative; competitive pricing for the
company's products; changes in raw materials pricing; energy and other
costs; fluctuations in demand and changes in production capacities;
changes to economic growth in the United States and international
economies; government policies and regulations, including, but not
limited to those affecting the environment and the tobacco industry;
adverse results in current or future litigation, currency movements
and other risk factors discussed in the company's Annual Report on
Form 10-K for the year ended December 31, 2005, and in other filings
made from time to time with the SEC.
MeadWestvaco undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events or otherwise. Investors are advised, however, to consult
any further disclosures made on related subjects in the company's
reports filed with the SEC.
SOURCE: MeadWestvaco Corp.