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MeadWestvaco Corp. Reports Operating Results (10-Q)

May 08, 2009 | About:
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MeadWestvaco Corp. (MWV) filed Quarterly Report for the period ended 2009-03-31.

MeadWestvaco Corporation is one of the major producers of paperboard andpaper in the United States. It converts paperboard and paper into a variety of end-products manufactures a variety of specialty chemicals produces lumber sells timber from its timberlands and is engaged in land development. MeadWestvaco Corp. has a market cap of $2.71 billion; its shares were traded at around $15.85 with a P/E ratio of 29.9 and P/S ratio of 0.3. The dividend yield of MeadWestvaco Corp. stocks is 5.9%. MeadWestvaco Corp. had an annual average earning growth of 18.6% over the past 5 years.

Highlight of Business Operations:

For the three months ended March 31, 2009, MeadWestvaco Corporation (MeadWestvaco, MWV or the company) reported a net loss from continuing operations of $79 million, or $0.46 per share, compared to a net loss from continuing operations of $8 million, or $0.04 per share, for the three months ended March 31, 2008. The results from continuing operations for the three months ended March 31, 2009 include after-tax restructuring charges of $51 million, or $0.30 per share, related to employee separation costs, asset write-downs and facility closures. The results from continuing operations for the three months ended March 31, 2008 include after-tax restructuring charges of $5 million, or $0.03 per share, related to employee separation costs, asset write-downs and facility closures, and an after-tax gain of $6 million, or $0.04 per share, from the recognition of a curtailment gain associated with the companys U.S. pension plan.

Profit for the Packaging Resources segment was $19 million for the three months ended March 31, 2009 compared to $32 million for the three months ended March 31, 2008. During 2009, the segment took aggressive actions to match production with demand in addition to its planned maintenance outages. These actions resulted in lower production volumes which negatively impacted segment profit compared to 2008. During 2009, market- and maintenance-related downtime totaled 85,000 tons (57,000 SBS and 28,000 CNK®) higher compared to 2008. Shipment declines in paperboard grades for tobacco and beverage packaging were modest, while declines in more economically-sensitive grades for commercial print and general packaging markets were steeper. Profit in 2009 was negatively affected by $29 million from higher unabsorbed fixed manufacturing costs, $15 million from higher input costs including energy, raw materials and freight, $10 million from the impact of unfavorable foreign currency exchange and $9 million from lower volume compared to 2008. Profit in 2009 benefited by $32 million from improved pricing and product mix and $18 million from improved productivity compared to 2008.

Profit for the Consumer Solutions segment was $13 million for the three months ended March 31, 2009 compared to $9 million for the three months ended March 31, 2008. During 2009, increased segment profit was driven by improved productivity due to ongoing business improvement actions and from lower input costs for energy, raw materials and freight compared to 2008. As part of the companys strategy to focus its business on higher-value, differentiated packaging opportunities, the segment is continuing to streamline its product line and manufacturing footprint. Since commencing these actions in the fourth quarter of 2008, the segment has announced the closure of six manufacturing locations. Profit in 2009 benefited by $23 million from improved productivity and $3 million from lower input costs for energy, raw materials and freight compared to 2008. Profit in 2009 was negatively impacted by $10 million from the impact of unfavorable foreign currency exchange, $10 million from unfavorable pricing and product mix, and $2 million from lower volume compared to 2008.

Profit for the Specialty Chemicals segment was $1 million for the three months ended March 31, 2009, compared to $12 million for the three months ended March 31, 2008. In response to lower demand during 2009, the segment operated its production facilities at significantly reduced utilization rates to reduce inventory and manufacturing cash costs. Profit in 2009 was negatively impacted by $12 million from unabsorbed fixed manufacturing costs associated with market-related downtime, $7 million from lower volume, $2 million from increased input costs for energy, raw materials and freight, and $1 million from the impact of unfavorable foreign currency exchange compared to 2008. Profit in 2009 benefited by $9 million from improved pricing and product mix and $2 million from improved productivity compared to 2008.

Sales for the Community Development and Land management segment were $86 million for the three months ended March 31, 2009 compared to $21 million for the three months ended March 31, 2008. Segment profit was $56 million for the three months ended March 31, 2009 compared to $8 million for the three months ended March 31, 2008. The major driver of segment sales and profit improvement in 2009 was real estate activities which contributed $53 million of operating profit in 2009 compared to $4 million in 2008. The segment sold approximately 34,000 acres for gross proceeds of $68 million in 2009 compared to approximately 2,000 acres for gross proceeds of $5 million in 2008. Profit from forestry operations and leasing activities was $3 million in 2009 compared to $4 million in 2008.

Cash used in financing activities was $68 million for the three months ended March 31, 2009 compared to cash provided by financing activities of $114 million for the three months ended March 31, 2008. Net cash used in financing activities for the three months ended March 31, 2009 was driven by dividend payments of $39 million and by changes in book overdrafts and other uses of funds of $29 million. Net cash provided by financing activities for the three months ended March 31, 2008 was driven by a net increase in short-term notes payable of $157 million and by changes in book overdrafts of $14 million, offset in part by dividend payments of $40 million and a net decrease in long-term debt of $17 million.

Read the The complete ReportMWV is in the portfolios of Brian Rogers of T Rowe Price Equity Income Fund, Brian Rogers of T Rowe Price Equity Income Fund.

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