Westvaco Reports Third Quarter Earnings Increased 10.5 Percent
26 August 1999
Westvaco Reports Third Quarter Earnings Increased 10.5 Percent
NEW YORK--Aug. 26, 1999--Westvaco Corporation today reported its fiscal third quarter and nine-month sales and earnings.Sales in the third quarter of 1999 ended July 31, totaled $700.2 million, a 3.8 percent decrease compared to the same period a year ago, and reflect a 0.4 percent increase in volume and 4.2 percent decrease in price and product mix. Earnings in the third quarter of 1999 were $35.0 million, or 35 cents per share (basic and diluted), a 10.5 percent increase from 1998 third quarter earnings of $31.7 million, or 31 cents per share (basic and diluted). Earnings for the 1999 third quarter include a gain of $2 million, or 2 cents per share, from the sale of nonstrategic timberlands.
Sales for the nine months of 1999 were $2.0 billion, a 5.7 percent decline compared to the year earlier period, and reflect a 0.5 percent decline in volume and a 5.2 percent decline in price and mix. Earnings for the nine months of 1999 totaled $87.5 million, or 87 cents per share (basic and diluted), an 11.4 percent decrease from $98.8 million, or 97 cents per share (basic and diluted), earned during nine months of 1998. Earnings for the nine months of 1999 include a gain of $6 million, or 6 cents per share, from the sale of nonstrategic timberlands.
"Financial results for the third quarter showed promise as we began to see early signs of improvement in U.S. coated printing paper and packaging markets and the continuation of a gradual economic recovery in Asia and Brazil," said John A. Luke, Jr., Chairman and Chief Executive Officer. "We also continued to benefit from our comprehensive cost management program, reduced capital spending and strategy of market leadership through product and service differentiation."
Mr. Luke said that during the third quarter the company lowered its 1999 capital spending projection for the second time. The original target was $275 million, well below the levels in previous years when Westvaco completed a major capital improvement program. The target was subsequently reduced to about $250 million, and the company now expects fiscal 1999 capital spending to total about $240 million. He added that the company is well ahead of its multi-year goal of $100 million a year in sustainable cost reductions. The program was announced in late 1998, and by the end of the third quarter savings were accumulating at an annual run rate exceeding $80 million.
Mr. Luke noted that coated paper markets, the industry's most challenging sector, benefited from increased demand from catalogue and direct mail customers. This increased demand, he noted, led to price improvement for coated papers late in the third quarter.
Mr. Luke added that ongoing economic recovery in Asia and Brazil, along with solid U.S. market conditions, benefited Westvaco's packaging businesses. Higher demand helped to bolster industry bleached board order backlogs and contributed to higher prices for linerboard. In Brazil, higher demand for corrugated packaging helped Rigesa, Ltda., Westvaco's wholly-owned subsidiary, to record its highest shipment volume in more than 18 months. In addition, demand for Westvaco's Kraftpak(R) unbleached folding carton board continued to improve.
Other businesses also performed well. The domestic and international market outlook remained positive for saturating kraft, which is used in decorative laminates such as countertops, furniture and flooring. In the company's specialty chemicals business, demand began to increase for ingredients used in both fabric dye and asphalt, principally as a result of Asia's ongoing economic recovery. In addition, continued strong auto sales and the auto industry's preparations for the 2000 model year are positive signs for sales of Westvaco's activated carbon, which is used in automotive emission controls.
Westvaco Corporation (www.westvaco.com), headquartered in New York, NY, is a major producer of paper, packaging, and specialty chemicals with annual sales of $2.9 billion. International business accounts for approximately 25 percent of sales and involves customers in more than 70 nations. In addition to exporting a wide range of products from the United States, the company further supports its global packaging business with wholly-owned manufacturing operations in Brazil and the Czech Republic and a joint venture in China. Westvaco owns 1.5 million acres of timberland in the United States and Brazil.
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 the 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 in or implied by the forward-looking statements include, but are not limited to, competitive pricing for the company's products; changes in raw materials, energy and other costs; impact of Year 2000 issues; fluctuations in demand and changes in production capacities; changes to economic growth in the U.S. and international economies, especially in Asia and Brazil; government policies and regulations, including but not limited to those affecting the environment and the tobacco industry; and currency movements.
Consolidated statement of income Third quarter Nine months
[Unaudited] In thousands, ended July 31 ended July 31
except per share ------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
Sales $700,202 $727,826 $2,030,398 $2,154,126
Other income (expense) 5,819 3,416 19,135 12,198
--------- --------- --------------------
706,021 731,242 2,049,533 2,166,324
------- ------- --------- ---------
Cost of products sold 493,177 528,512 1,443,373 1,547,656
Selling, research and
administrative expenses 56,990 57,317 168,228 174,842
Depreciation and amortization 69,831 70,772 207,948 209,950
Interest expense 31,037 25,867 92,481 80,880
-------- -------- --------- ----------
651,035 682,468 1,912,030 2,013,328
------- ------- --------- ---------
Income before taxes 54,986 48,774 137,503 152,996
Income taxes 20,000 17,100 50,000 54,200
-------- -------- --------- ----------
Net income $ 34,986 $ 31,674 $ 87,503 $ 98,796
======== ======== ========= ==========
Net income per common
share - basic $ .35 $ .31 $ .87 $ .97
========== ========= ========== ==========
Average number of shares
outstanding 100,252 101,297 100,215 101,474
======= ======= ========= =========
Net income per common
share - diluted $ .35 $ .31 $ .87 $ .97
========== ========= ========== =========
Average number of shares
and equivalents outstanding 100,759 101,699 100,464 102,088
======= ======= ========= =========
Consolidated balance sheet At July 31
[Unaudited] In thousands ----------
1999 1998
---- ----
Assets
Cash and marketable securities $ 114,117 $ 112,710
Receivables 286,654 277,524
Inventories 265,785 284,030
Prepaid expenses 63,795 64,072
----------- ----------
Current assets 730,351 738,336
Plant and timberlands - net 3,692,985 3,796,770
Other assets 551,113 452,848
---------- ---------
$4,974,449 $4,987,954
========= =========
Liabilities and shareholders' equity
Current liabilities $ 469,473 $ 445,531
Long-term obligations 1,511,656 1,526,850
Deferred income taxes 810,403 758,216
Shareholders' equity 2,182,917 2,257,357
--------- ---------
$4,974,449 $4,987,954
========= =========
Consolidated statement of cash flows Nine months
[Unaudited] In thousands ended July 31
1999 1998
---- ----
Cash flows from operating activities:
Net income $ 87,503 $ 98,796
Adjustments not affecting cash:
Provision for depreciation and
amortization 207,948 209,950
Provision for deferred income taxes 44,766 41,935
Other, net (65,021) (35,300)
Net changes in assets and liabilities (10,812) (24,481)
Other, net 3,201 (10)
---------- ----------
Net cash provided by operating
activities 267,585 290,890
Cash flows from investing activities:
Additions to plant and timberlands (176,977) (340,770)
Other investments (22,659) -
Proceeds from sales of plant and timberlands 15,514 4,025
Other, net (460) (157)
----------- ---------
Net cash used in investing activities (184,582) (336,902)
Cash flows from financing activities:
Proceeds from issuance of stock 9,039 3,767
Proceeds from issuance of debt 744,405 331,581
Dividends paid (66,121) (67,042)
Treasury stock purchases (10,223) (27,950)
Repayment of debt (734,456) (254,081)
-------- --------
Net cash provided by (used in)
financing activities (57,356) (13,725)
Effect of exchange rate changes on cash (16,580) (2,907)
--------- ----------
Increase (decrease) in cash and marketable
securities 9,067 (62,644)
Cash and marketable securities:
At beginning of period 105,050 175,354
-------- --------
At end of period $ 114,117 $ 112,710
======== ========
Business segment information Third quarter Nine months
[Unaudited] In millions ended July 31 ended July 31
1999 1998 1999 1998
---- ---- ---- ----
Sales
Bleached $477.2 $492.5 $1,387.7 $1,464.6
Unbleached 143.1 149.9 415.4 448.1
Chemicals 80.8 84.9 230.6 246.0
Corporate and other items (0.9) 0.5 (3.3) (4.6)
------- ------- ---------- ---------
Consolidated sales $700.2 $727.8 $2,030.4 $2,154.1
===== ===== ======= =======
Operating profit
Bleached $ 60.2 $ 59.3 $ 167.7 $ 186.4
Unbleached 29.2 26.9 75.1 74.1
Chemicals 16.5 20.3 53.7 51.0
Corporate and other items (50.9) (57.7) (159.0) (158.5)
----- ------ ------- -------
Consolidated income
before taxes $ 55.0 $ 48.8 $ 137.5 $ 153.0
===== ====== ======== ========
Foreign operations
[Unaudited] In millions
Results of unbleached operations for Rigesa, Ltda.,
our Brazilian subsidiary, were as follows:
Sales $34.3 $47.7 $104.1 $138.9
==== ==== ===== =====
Net income $ 6.5 $ 6.4 $ 15.3 $ 20.0
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