MeadWestvaco's Q1 net income climbs 182% year-over-year to US$31M on improved cost of sales and US$15M gain from income tax provision; sales up less than 1% to US$1.32B

RICHMOND, Virginia , April 30, 2014 (press release) – MeadWestvaco Corporation (NYSE: MWV), a global leader in packaging and packaging solutions, reported improved results and EBITDA margin expansion in all packaging businesses in the first quarter of 2014 compared to the first quarter of 2013 (see table below). As a result, total company EBITDA ex-items increased 24% to $191 million, or 14% of sales. Refer to the “Use of Non-GAAP Measures” section of this release for further information.

"We are focused on ensuring that continued progress with our profitable growth strategy becomes even more evident in our bottom line performance, aiming for market-leading margins in each business," said John A. Luke Jr., chairman and chief executive officer, MWV. "Through disciplined execution of our strategy, we more than doubled earnings per share compared to the first quarter last year, and increased profitability in each of our packaging businesses.

"Our end-market participation strategies have delivered market share gains with top customers, along with increased sales of innovative new products and growth in key regions around the world," Luke continued. "During the first quarter, we increased volumes for beverage packaging, aseptic liquid packaging and food service paperboard. We also delivered double digit sales growth across the plastic dispensing platform in Home, Health & Beauty, driven by the rebound in the North American lawn and garden market and strong growth in our fragrance business.

“In all, we made good progress in the first quarter and we are confident that our strategies will deliver even greater performance going forward – including increased earnings and cash flow for the full year.”

Quarterly Comparison

Sales from continuing operations in the first quarter of 2014 were $1.32 billion compared to $1.31 billion in the first quarter of 2013. Income from continuing operations attributable to the company in the first quarter of 2014 was $31 million or $0.18 per share, compared to a loss of $2 million or $0.01 per share in 2013. Income from continuing operations attributable to the company excluding special items was $39 million or $0.23 per share for the first quarter of 2014, compared to $16 million or $0.09 per share for the first quarter of 2013.

First Quarter Segment Results

Following is a summary of first quarter 2014 results by business segment. All comparisons of the results for the first quarter of 2014 are with the first quarter of 2013 on a continuing operations basis.

Food & Beverage

In the Food & Beverage segment, sales were $763 million in the first quarter of 2014 compared to $761 million in the first quarter of 2013. EBITDA increased 15% to $109 million in the first quarter of 2014 compared to $95 million in the first quarter of 2013.

3% price/mix improvement from gains across all targeted paperboard end-markets
Volume growth in global beverage (+3%), aseptic liquid packaging (+11%) and food service (+5%)
Positive productivity excluding $17 million of negative weather-related operational impacts (total negative weather-related impacts were $25 million)
$8 million productivity benefit from new Covington biomass boiler; on track with company’s IRR target
Good bounceback in volumes in March (+17%); strong backlogs in bleached paperboard and CNK® – 5 to 6 weeks
Home, Health & Beauty

In the Home, Health & Beauty segment, sales were $205 million in the first quarter of 2014 compared to $188 million in the first quarter of 2013. EBITDA increased 45% to $29 million in the first quarter of 2014 compared to $20 million in the first quarter of 2013.

Home & Garden sales growth (+19%) from stronger lawn and garden business and share gains with innovative trigger and aerosol actuator solutions
Beauty & Personal Care sales growth (+12%) from stronger fragrance business (+23%) with share gains in Melodie® product line
Healthcare dispensing sales growth (+16%) from continued preservative-free pump penetration
Positive productivity from higher injection molding plant loadings and operational excellence initiatives
Agreement reached in April for sale of European Beauty & Personal Care folding carton business
$3 million negative impact from European Beauty & Personal Care folding carton business and Brazil transformation; Brazil dispensing sales up 14% in local currency
Industrial

In the Industrial segment, sales were $128 million in the first quarter of 2014 compared to $132 million in the first quarter of 2013. EBITDA increased 24% to $26 million in the first quarter of 2014 compared to $21 million in the first quarter of 2013.

14% segment sales growth ex-currency
Price/mix improvement (+13%) from pricing initiatives aimed to offset inflation
Volume essentially unchanged from increased sales of high-quality paper offsetting lower corrugated solutions volume
Positive productivity from increased production and cost optimization efforts at the expanded Brazilian paperboard facility
Specialty Chemicals

In the Specialty Chemicals segment, sales were $232 million in the first quarter of 2014 compared to $226 million in the first quarter of 2013. EBITDA increased 2% to $59 million in the first quarter of 2014 compared to $58 million in the first quarter of 2013.

Volume growth (+3%) and price/mix improvement (+1%) from gains in higher value strategic markets – oilfield, asphalt, adhesives, carbon technologies
Positive productivity from improved utilization rates
Community Development and Land Management

Sales for the Community Development and Land Management segment were $2 million in the first quarter of 2014 compared to $5 million in the first quarter of 2013. A loss of $3 million was reported in the first quarter of 2014 compared to a loss of $4 million in the first quarter of 2013.

Other Items

During the first quarter of 2014, the company entered into an accelerated stock repurchase program with certain financial institutions and repurchased $300 million of MeadWestvaco’s common stock using proceeds from the recent transaction with Plum Creek Timber Company, Inc. As a result, approximately 7.5 million shares were retired; however, additional shares are expected to be received by the company at the conclusion of the program no later than June 30, 2014.

In the first quarter of 2014, total pre-tax input costs of energy, raw materials and freight increased by $13 million compared to the first quarter of 2013 on a continuing operations basis.

In the first quarter of 2014, the pre-tax impact on earnings from foreign currency exchange was flat compared to the first quarter of 2013 on a continuing operations basis.

Cash flow used in operating activities from continuing operations was $207 million in the first quarter of 2014 compared to $110 million in the first quarter of 2013, reflecting a one-time alternative minimum tax payment of $98 million pursuant to the sale of forestlands in the fourth quarter of 2013, as well as higher working capital levels including increased inventories from strong production in March in response to customer demand.

Capital spending declined to $66 million in the first quarter of 2014 compared to $115 million in the first quarter of 2013, reflecting lower overall investment primarily related to the Covington biomass boiler, which was completed in the fourth quarter of 2013.

The effective tax rate attributable to continuing operations, excluding the effects of discrete tax items, was approximately 29% in the first quarter of 2014. The mix and level of earnings between domestic and foreign operations contributed to the difference between the effective tax rate and statutory rates.

During the first quarter of 2014, MWV paid a regular quarterly dividend of $0.25 per share and a special dividend of $1.00 per share using proceeds from the recent transaction with Plum Creek Timber Company, Inc. On April 28, 2014, MWV declared a regular quarterly dividend of $0.25 per common share. The payment of the dividend will be made on June 2, 2014, to shareholders of record at the close of business on May 8, 2014.

Second Quarter 2014 Outlook

For the second quarter of 2014, earnings excluding special items are expected to be well above last year. While the company anticipates negative impacts from the cost of raw materials and currency weaknesses, the principal factors driving the expected improvement are:

Increases in consumer and industrial packaging volumes, including paperboard and plastic dispensing solutions across major end-markets
Benefits from ongoing value-based pricing initiatives across all packaging businesses
Productivity improvements and continued positive operating leverage from increased plant utilization rates
Benefits from continuing cost reduction efforts
Conference Call

Investors may participate in the live conference call today at 10:00 a.m. EDT by dialing 1 (800) 230-1092 (toll-free domestic) or 1 (612) 332-0335 (international); passcode: MeadWestvaco. Please call to register at least 10 minutes before the conference call begins. The live conference call and presentation slides may be accessed on MWV's website at www.mwv.com. After connecting to the home page, go to the Investors page and look for the link to the webcast. Please go to the website at least 15 minutes prior to the call to register, download and install any necessary audio software. A replay of the call will be available for one month via the telephone starting at 12:00 p.m. EDT on April 30, and can be accessed at 1 (800) 475-6701 (toll-free domestic) or 1 (320) 365-3844 (international); access code: 323581.

About MWV

MeadWestvaco Corporation (NYSE:MWV) is a global packaging company providing innovative solutions to the world’s most admired brands in the healthcare, beauty and personal care, food, beverage, home and garden, tobacco, and agricultural industries. The company also produces specialty chemicals for the automotive, energy and infrastructure industries, and maximizes the value of its development land holdings. MWV’s network of 125 facilities and 16,000 employees spans North America, South America, Europe and Asia. The company has been recognized for financial performance and environmental stewardship with a place on the Dow Jones Sustainability World Index every year since 2004. Learn more at www.mwv.com.


Consolidated Statements of Operations

In millions, except per share amounts (Unaudited)

 
 
      Three Months Ended
      March 31,
      2014    

20131

Net sales     $ 1,322       $ 1,311  
                     
Cost of sales       1,075         1,115  
Selling, general and administrative expenses       161         168  
Interest expense       53         39  
Other income, net       (13 )       (4 )
                     
Income (loss) from continuing operations before income taxes       46         (7 )
                     
Income tax provision (benefit)       15         (6 )
Income (loss) from continuing operations       31         (1 )
                     
Income from discontinued operations, net of income taxes       -         13  
                     
Net income       31         12  
Less: Income attributable to non-controlling interests, net of taxes       -         1  
Net income attributable to the company     $ 31       $ 11  
                     
Income (loss) from continuing operations attributable to the company     $ 31       $ (2 )
                     
                     
Net income (loss) per diluted share attributable to the company:                    
                     
Income (loss) from continuing operations     $ 0.18       $ (0.01 )
Income from discontinued operations       -         0.07  
Net income attributable to the company     $ 0.18       $ 0.06  
                     
Shares used to compute net income per diluted share       173.5         176.4
 

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