MeadWestvaco Posts Improved Third Quarter Earnings
Oct. 25, 2007 - MeadWestvaco Corp. today reported net income for the
third quarter of 2007 of $121 million, or $0.66 per share. Included in
the results are after-tax restructuring charges of $13 million, or $0.07
per share, related to asset write-downs and employee separation costs,
and after-tax one-time costs of $4 million, or $0.02 per share, related
to the company's cost initiative. The results
also include an after-tax gain of $53 million, or $0.29 per share,
related to the sale of approximately 62,000 acres of West Virginia
forestlands. Excluding the effects of above items, adjusted earnings per
share were $0.46 for the third quarter of 2007 versus $0.41 for the
third quarter of 2006 computed on the same basis (1).
Sales in the third quarter of 2007 were $1.80 billion, a 3 percent
increase compared to sales of $1.75 billion in the third quarter of 2006.
Profit from MeadWestvaco's primary business
segments increased 3 percent to $190 million in the third quarter of
2007. In the nine-month period ended September 30, 2007, profit from
MeadWestvaco's primary business segments
increased 12 percent to $416 million from $372 million in the same
period of 2006. In the third quarter and nine-month period of 2007,
higher selling prices and improved mix and productivity more than offset
higher input costs for energy, raw materials and freight.
"MeadWestvaco's execution of our packaging
strategy continues to deliver consistent earnings improvement in most of
our targeted markets," said John A. Luke, Jr.,
chairman and chief executive officer. "During
the third quarter, we generated improved profitability for shareholders
despite significantly higher costs for critical raw materials. I am
confident that our solid operating performance and focus on execution
will result in year-over-year fourth quarter improvement and better
overall performance in 2007."
Mr. Luke added, "MeadWestvaco's strategy for
profitable growth includes a relentless focus on our packaging platform,
expansion into emerging markets and building a valuable land management
business. We recently closed the acquisitions of Keltec Dispensing
Systems and Hayes Products to augment our pump and sprayer line of
business, celebrated the opening of our expanded packaging facility in
Wuxi, People's Republic of China, and
completed the sales of non-strategic forestlands for $493 million. These
milestones are an indication that we continue to advance the strategic
imperatives we laid out at the beginning of the year to build value for
In the third quarter of 2006, net income was $56 million, or $0.31 per
share. Included in the results were after-tax restructuring charges of
$12 million, or $0.07 per share, related to asset write-downs and
employee separation costs. In addition, the company incurred after-tax
one-time costs of $6 million, or $0.03 per share, related to the company's
In the Packaging Resources segment, profit in the third quarter of 2007
increased 8 percent to $97 million compared to $90 million in 2006.
Sales in the third quarter of 2007 grew 4 percent to $779 million
compared to $752 million in 2006. Segment profit growth and margin
improvement was driven by improved price, mix and productivity. Higher
input costs for wood, other raw materials and freight negatively
impacted profitability. Overall paperboard packaging pricing improved 4
percent, reflecting the company's ongoing
pricing actions across its lines of business to offset inflationary
costs of raw materials.
In the Consumer Solutions segment, profit in the third quarter of 2007
was $26 million compared to $30 million in 2006, a 13 percent decrease.
Sales in the third quarter of 2007 increased 4 percent to $611 million
from $585 million in 2006. Improved sales in the third quarter of 2007
reflect renewed growth in the global media business and solid growth in
the global healthcare and personal care businesses. The growth in media
is a result of the company's commercial
refocusing efforts, resulting in improved market share for specialty
media packaging. Sales were negatively impacted by market weakness in
the segment's lawn and garden business due to
drought conditions in the mid-Atlantic, Southeastern and Western regions
of the U.S. Segment profit decreased due to lower pricing in media and
to higher raw material input costs, principally plastic resin and
stainless steel, which was partially mitigated by productivity
Consumer & Office Products
In the Consumer & Office Products segment, profit in the third quarter
of 2007 increased 4 percent to $51 million from $49 million in 2006.
Sales in the third quarter of 2007 decreased 1 percent to $334 million
compared to $339 million in 2006. Segment profit growth and margin
improvement was driven by an enhanced product mix from the company's
focus on proprietary branded products while lower volume and higher
costs for paper negatively impacted results. The company's
Five Star® consumer products line experienced
a solid back to school season. This segment continues to be affected by
Asian-based imported products.
In the Specialty Chemicals segment, profit in the third quarter of 2007
increased 7 percent to $16 million compared to $15 million in 2006.
Sales in the third quarter of 2007 were $131 million which were
unchanged compared to 2006. Segment profit growth and margin improvement
were driven by improved product pricing and lower selling, general and
administrative expenses, which more than offset higher raw material
input costs and lower volume. In the pine chemicals business, increased
asphalt volume was offset by weakness in chemicals used in certain
building products. In the carbon business, lower North American
automotive sales continued to negatively impact both volume and mix.
Corporate and Other
Corporate and Other loss in the third quarter of 2007 was $28 million
compared to $116 million in 2006. Included in the 2007 results is an $83
million pre-tax gain related to the sale of approximately 62,000 acres
of West Virginia forestlands.
MeadWestvaco recently sold approximately 290,000 acres of owned
forestlands and approximately 95,000 acres of land on which the company
had long-term timber rights for $493 million. In the third quarter of
2007, MeadWestvaco closed the sale of approximately 62,000 acres of
owned forestlands located in West Virginia for $93 million. In the
fourth quarter of 2007, MeadWestvaco closed the sale of approximately
228,000 acres of owned forestlands and approximately 95,000 acres under
long-term timber contracts for $400 million. As a result of this
transaction, the fourth quarter results will reflect a pre-tax gain of
about $160 million. The company intends to return to shareholders
proceeds obtained from these transactions.
During the third quarter of 2007, prices for energy, wood, raw materials
and freight increased $36 million over the prior year. Capital spending
increased to $226 million in the nine-month period ended September 30,
2007, compared to $186 million in the same period of 2006 due primarily
to the addition of the dispensing and sprayer business and expansion
initiatives in Wuxi, People's Republic of
Cash flow from operations was approximately $370 million for the
nine-month period ended September 30, 2007, compared to $351 million in
the same period last year.
The annual effective tax rate for 2007 is estimated to be about 30
percent. The differences in the effective tax rates of 25 percent for
the third quarter and 29 percent for the first three quarters of 2007
compared to statutory rates were primarily the result of the level and
mix of domestic versus foreign earnings and the impact of certain
discrete items, including a reduction in the German statutory rate.
Outlook: Fourth Quarter 2007
For the fourth quarter of 2007, MeadWestvaco expects total profit from
the primary business segments to improve modestly compared to the prior
MeadWestvaco expects solid year-over-year segment profit improvement in
its Packaging Resources segment. Backlogs remain seasonally firm for the
company's key paperboard products. Costs for
wood, oil-based materials and freight are expected to remain elevated in
the fourth quarter. The company, however, expects to continue to
overcome the impact of input cost inflation with price realizations, mix
improvements and productivity gains.
In the Consumer Solutions segment, MeadWestvaco expects segment profit
to be above fourth quarter 2006 levels. Improved demand in the lawn and
garden business, solid performance in beverage and food packaging, and
continued growth in the global personal care and healthcare packaging
businesses, as well as price realizations to offset higher plastic resin
and stainless steel costs, will be the primary drivers of this expected
In the Consumer & Office Products segment, MeadWestvaco expects segment
profit to be similar to year-ago levels. Continued benefits from
improved product mix and productivity will be offset by lower volume and
higher input costs for raw materials.
In the Specialty Chemicals segment, MeadWestvaco expects segment profit
to be similar to year-ago levels. Continued price improvement across all
product lines will be offset by volume declines in carbon and building
materials products, and by continued input cost inflation.
SOURCE: MeadWestvaco Corp.