Smurfit-Stone Container First Quarter Loss Narrows
April 26, 2007 - Smurfit-Stone Container Corp. today reported a net loss available to common stockholders of $55 million, or $0.21 per diluted share, for the first quarter of 2007. These results include:
- A restructuring charge of $0.06 per diluted share primarily from the
closure of container plants and headcount reductions,
- A $0.05 per diluted share charge related to the early extinguishment
of debt, and
- A loss of $0.01 per diluted share from non-cash foreign currency
First quarter 2007 results compare favorably to a net loss of $0.25 per diluted share for the prior year first quarter, which included a net $0.04 per share gain related to asset sales, a non-cash foreign currency gain, and restructuring charges primarily due to plant closures. First quarter 2006 net loss was increased by $1 million to reflect the adoption of the new accounting standard for planned major maintenance activities.
Sales for the first quarter 2007 were $1.8 billion, up 5 percent from the first quarter 2006.
Commenting on first quarter 2007 results, Patrick J. Moore, chairman and chief executive officer, said, "Our year-over-year earnings improvement reflects the realization of higher prices for our products and benefits achieved from our strategic initiatives plan. Consistent with our previous guidance, our first quarter earnings declined sequentially from the fourth quarter 2006 due to escalating fiber prices and seasonal factors. Containerboard production was down as a result of increased mill maintenance downtime and two fewer production days. Likewise, energy usage was seasonally higher and employee costs increased due to timing issues. While managing these challenges, we can point to a number of accomplishments this past quarter."
First quarter achievements included:
- Segment operating profits of $102 million, a $73 million improvement
compared to the prior year first quarter,
- Benefits from the company's strategic initiatives plan of $86 million
towards the 2007 cumulative savings target of $420 million, and
- Refinancing the company's 9.75 percent senior notes, which will reduce
annual interest expense and extend the company's debt maturities.
Higher average first quarter prices drove the company's year-over-year improvement in net sales and operating profits. Average domestic linerboard and corrugated container prices improved 12.8 percent and 6.9 percent, respectively, from the first quarter 2006 while prices were flat sequentially. Corrugated container shipments were down 5.8 percent compared to the first quarter 2006. The decrease stems primarily from the company's continued efforts to rationalize its box plant system which impacted shipments by approximately three percent. Slower U.S. economic conditions and actions to improve the profitability of marginal accounts also contributed to a decrease in packaging demand. Containerboard inventories continued to be aggressively managed and were down one percent from year-end 2006 and ten percent lower than levels one year ago. Higher costs negatively impacted results as escalating wood and recycled fiber prices reduced first quarter earnings by $23 million compared to the fourth quarter 2006.
Smurfit-Stone's strategic initiatives program remains on schedule. During the first quarter, the company reduced headcount by over 700 and closed three plants. It also announced the closure of five additional plants year- to-date.
Commenting on the company's outlook, Moore said, "We anticipate improved second quarter results following the seasonally softer first quarter. Our strategic initiatives will drive additional benefits. Likewise, moderating costs should contribute to improved earnings as we expect lower energy usage and less mill maintenance downtime in the second quarter. Considering these factors, as well as stronger demand for containerboard and packaging, we are confident that the company will return to profitability in the second quarter."
The company also announced plans to further realign its containerboard mill system over the next six months as part of its strategic initiatives plan. The Carthage, Indiana and Los Angeles, California medium mills, with combined annual capacity of approximately 200,000 tons, will be permanently closed. The company expects to incur a restructuring charge of approximately $18 million associated with these actions. The previously idled machine at the Jacksonville, Florida mill with capacity to produce approximately 170,000 tons of containerboard will be restarted. Commenting on this decision, Steven J. Klinger, president and chief operating officer, said: "As a result of this realignment, we will have a more flexible mill system as our Jacksonville mill can produce either recycled linerboard or medium. We are pursuing every opportunity to improve the company's cost structure and these changes will reduce future production costs."
Smurfit-Stone Container Corp. is the industry's leading integrated manufacturer of paperboard and paper-based packaging. Smurfit- Stone also is one of the world's largest paper recyclers. The company has led the industry in safety performance every year since 2001 and conducts its business in compliance with the environmental, health and safety principles of the American Forest & Paper Association. Smurfit-Stone operates approximately 180 facilities and employs approximately 24,500 people.
SOURCE: Smurfit-Stone Container Corp.