Filed by The Mead Corporation
pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under
the Securities Exchange Act of 1934
Subject Company: The Mead Corporation
Commission File No. 1-2267
FOR ADDITIONAL INFORMATION:
AMBER GARWOOD (media)
937/495-3573
MARK POMERLEAU (investors)
937/495-3456
MEAD REPORTS FOURTH QUARTER RESULTS
Fourth Quarter & Full-Year 2001 Overview
- Mead reported a net loss of $25.9 million or 26 cents per share in
the fourth quarter of 2001, compared to net earnings of $16.7 million or
17 cents per share for the same period in 2000.
- Excluding the impact of special items, fourth quarter 2001 earnings were
$1.0 million or 1 cent per share versus $18.7 million or 19 cents per
share for the prior year quarter. Fourth quarter 2001 special items
included a pretax charge of $41.7 million or 27 cents per share loss due
to the previously announced sale of assets and related paper machine
shutdown at the Devon Valley mill, the sale of Gilbert Paper and related
mill closure, costs associated with the proposed merger with Westvaco
Corporation and other charges.
- Fourth quarter 2001 sales were $0.93 billion compared to $1.04 billion
in 2000.
- For the year, the company reported a net loss of $22.7 million or 23
cents per share versus net earnings of $161.2 million or $1.58 per share
for 2000. Excluding the impact of special items, earnings were $16.1
million or 16 cents per share in 2001 compared to $169.7 million or
$1.66 per share the previous year.
- Sales were $4.2 billion in 2001 compared to $4.4 billion for 2000.
- A favorable effective tax rate had a positive effect on results for the
quarter and the full year.
(In millions, except per share amounts)
Quarter Ended Year Ended
Dec. 31 Dec. 31 Dec. 31 Dec. 31
2001 2000 2001 2000
Net sales $934.9 $1,044.9 $4,176.5 $4,368.1
Earnings (loss)
Net earnings (loss) $(25.9) $16.7 $(22.7) $161.2
Earnings (loss) excluding
accounting change impact $(25.9) $16.7 $(12.3) $163.6
Earnings excluding
special items $1.0 $18.7 $16.1 $169.7
Earnings (loss) per share (diluted)
Net earnings (loss) $(.26) $.17 $(.23) $1.58
Earnings (loss) excluding
accounting change impact $(.26) $.17 $(.13) $1.60
Earnings excluding
special items $.01 $.19 $.16 $1.66
DAYTON, Ohio. January 18, 2002 -- The Mead Corporation (NYSE: MEA) today
announced a net loss of $25.9 million or 26 cents per share in the fourth
quarter of 2001, compared to net earnings of $16.7 million or 17 cents per
share for the same period in 2000. Excluding the impact of special items,
fourth quarter 2001 earnings were $1.0 million or 1 cent per share versus
$18.7 million or 19 cents per share for the prior year quarter. Fourth quarter
2001 special items included a pretax charge of $41.7 million or 27 cents per
share loss due to the previously announced sale of assets and related paper
machine shutdown at the Devon Valley mill, the sale of Gilbert Paper and
related mill closure, costs associated with the proposed merger with Westvaco
Corporation and other charges. Fourth quarter 2001 sales were $0.93 billion
compared to $1.04 billion in 2000.
For the year, the company reported a net loss of $22.7 million or 23
cents per share versus net earnings of $161.2 million or $1.58 per share for
2000. Excluding the impact of special items, earnings were $16.1 million or 16
cents per share in 2001 compared to $169.7 million or $1.66 per share the
previous year. Special items for the year included a $10.4 million after-tax
charge for accounting changes related to the initial adoption of Statement of
Financial Accounting Standards No. 133, $39.5 million pretax charges
associated with sales and shutdowns, and $4.8 million pretax charges for costs
related to the proposed merger with Westvaco Corporation. Sales were $4.2
billion in 2001 compared to $4.4 billion for 2000.
"In 2001, our operating results for the fourth quarter and the full
year reflect extremely weak market conditions in coated paper and
containerboard," said Jerry Tatar, Mead chairman, president and chief
executive officer. "The continued economic slowdown led to lower selling
prices and to our decisions to take production downtime. Our coated paperboard
system, which includes our international beverage packaging business,
performed well in these difficult markets, although results continued to be
affected by the negative impact of the strong U.S. dollar. Our consumer and
office products business had its best year ever. The business recorded a solid
performance for school supplies and time management products and benefited
from greater operating efficiencies achieved in its converting and
distribution system."
Tatar added, "As we look toward the future, the proposed merger with
Westvaco Corporation brings new opportunities. We are focused on maximizing
the potential of both organizations and excited about the new enterprise.
Together, this combination makes compelling strategic sense."
On January 28, 2002, Mead will hold a special meeting of shareholders
for the purpose of considering the merger.
Paper
Paper segment results were a loss of $55.7 million in the fourth
quarter of 2001, compared to earnings of $28.9 million in the prior-year
quarter. Fourth quarter results included $38.5 million in special items
related to the sale or closure of facilities. In the quarter, Mead sold its
Gilbert Paper business. The sale and related mill closure resulted in a pretax
charge of $24.2 million. Mead also had a pretax charge of $14.3 million for
actions taken at the company's European specialty paper mill.
Fourth quarter sales were $399.2 million in 2001, down from $493.6
million in 2000. Sales and earnings results were lower than the fourth quarter
a year ago due to a decline in coated paper prices and costs associated with
market-related downtime. During the quarter, Mead took approximately 56,000
tons of coated paper out of production. As a result of the market-related
downtime, coated paper inventories were lower at year-end 2001 compared to
year-end 2000.
For the full year, the Paper segment had a loss of $76.5 million
compared to earnings of $181.9 million in 2000. Excluding pretax charges
related to special items of $38.5 million, the Paper segment's loss was $38.0
million for the year. Sales were $1.78 billion in 2001, down from $1.93
billion in 2000. Prices for coated paper declined 7% in 2001 from the prior
year. Lower average coated paper prices, costs associated with market downtime
and higher operating costs led to the full-year segment loss.
Packaging and Paperboard
The Packaging and Paperboard segment's fourth quarter 2001 earnings
were $25.1 million compared to $25.6 million in the same period in 2000.
Fourth quarter 2000 earnings included the impact of a $2.3 million special
item related to the closure of a container plant. Sales were $352.8 million in
the fourth quarter of 2001, compared to $373.9 million for the prior year
quarter.
In the quarter, the segment's earnings were affected by poor market
conditions for the Containerboard business, with weaker demand for corrugating
medium leading to lower selling prices. In line with these market conditions,
the Stevenson, Alabama, corrugating medium mill took 18,000 tons of downtime.
In Mead's coated board system, sales of beverage packaging were consistent
with the levels of the fourth quarter of the prior year.
For the full year, earnings were $119.7 million in 2001, down from
$174.0 million in 2000. Sales for the segment were $1.52 billion in 2001
versus $1.61 billion in 2000. Sales and earnings were lower versus the prior
year due to a 13% decline in selling prices for corrugating medium and the
impact of the strong U.S. dollar on the international packaging business.
Lower demand and prices for the solid wood products business also affected the
segment's earnings.
Consumer and Office Products
The Consumer and Office Products segment sales in the fourth quarter
were $182.9 million compared to $177.4 million in 2000. Earnings in the fourth
quarter of 2001 were $9.7 million compared to $11.8 million in the same period
in 2000. Earnings in both quarters included the impact of costs of
approximately $1 million related to the shutdown of facilities.
For the full year, sales increased to $875.7 million from $829.4
million in 2000. The segment's full year earnings improved to $85.8 million
from $61.7 million in 2000. Earnings include special items in both years
related to the sale or closing of facilities, amounting to charges of $1
million in 2001 and $6.1 million in 2000. The increase in earnings was a
result of higher operating efficiencies achieved through consolidating
facilities, realignment of the organization, divestiture of under-performing
assets and growth in international business in Canada and Mexico.
Investees
Mead's share of investees' earnings was $0.9 million in the fourth
quarter of 2001 compared to $1.3 million for the same period in 2000. For the
full year, Mead's share of earnings was $6.0 million in 2001 and $10.8 million
in 2000. The declines for the quarter and year resulted from lower prices for
oriented strand board.
Other
Capital expenditures totaled $202 million during 2001, representing
approximately 72% of annual depreciation and depletion for year-end 2001. Mead
repurchased 256,200 common shares during 2001. At year-end 2001, Mead had 99.1
million common shares outstanding versus 98.9 million at the close of 2000.
Mead's income tax rates for the fourth quarter and full year were
favorable to the statutory tax rate which led to a larger than normal tax
benefit. The benefit of approximately $11 million was primarily a result of a
one-time tax savings for 2001 on certain international sales.
Mead Profile
The Mead Corporation, a forest products company with $4.2 billion in
annual sales, is one of the leading North American producers of coated paper,
coated paperboard and consumer and office products, a world leader in multiple
packaging and specialty paper, and a producer of high-quality corrugating
medium. In management of the company's more than two million acres of forests,
Mead is committed to practicing principled forest stewardship and using
resources in a responsible and sustainable manner. For additional information
about Mead, visit the company's web site at www.mead.com.
Additional Information
The Mead Corporation ("Mead") and Westvaco Corporation ("Westvaco") have filed
with the SEC and mailed to investors a definitive joint proxy
statement/prospectus concerning the proposed merger of Mead and Westvaco.
Investors are urged to read the joint proxy statement/prospectus and any other
relevant documents filed with the SEC in connection with the proposed merger,
as well as any amendments and supplements to those documents before making any
voting or investment decision, because they contain important information on
the proposed merger. Investors can obtain the documents filed with the SEC
free of charge at the SEC's website (www.sec.gov). In addition, documents
filed with the SEC by Mead or Westvaco with respect to the proposed
transaction may be obtained free of charge by contacting The Mead Corporation,
Mead World Headquarters, Courthouse Plaza Northeast, Dayton, Ohio 45463,
Attention: Mark Pomerleau, Director of Investor Relations (tel.: (937)
495-3456), or Westvaco Corporation, One High Ridge Park, Stamford, Connecticut
06905, Attention: John W. Hetherington (tel.: (203) 461-7500).
Mead and Westvaco and their respective directors and executive officers may be
deemed to be participants in the solicitation of proxies from Mead
shareholders and Westvaco shareholders, respectively, in connection with the
proposed merger between Mead and Westvaco. For more information on who may be
deemed to be participants in the solicitation of proxies, please see Mead's
and Westvaco's Current Report on Form 8-K filed with the SEC on October 18,
2001.
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 each
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 or implied for the
forward-looking statements include, but are not limited to, events or
circumstances which affect the ability of Mead and Westvaco to integrate
successfully and achieve the anticipated benefits of the transaction;
competitive pricing for each company's products; changes in raw materials;
energy and other costs; 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. Mead and Westvaco undertake no obligation to
publicly update any forward-looking statement, whether as a result of new
information, future events or otherwise. Investors are advised, however, to
consult any further disclosures made on related subjects in each company's
reports filed with the SEC.
- more -
Mead Reports Fourth Quarter & Full-Year 2001 Results (page 6)
STATEMENTS OF OPERATIONS
(All dollar amounts in millions, except per share amounts)
(Unaudited)
Fourth Qtr Ended Full Year Ended
---------------- ---------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
---- ---- ---- ----
Net sales $ 934.9 $ 1,044.9 $ 4,176.5 $ 4,368.1
Costs and expenses:
Cost of sales 854.0 870.9 3,642.3 3,529.6
Selling and administrative expenses 117.8 126.7 486.0 493.1
---------- -------- ---------- ----------
971.8 997.6 4,128.3 4,022.7
---------- -------- ---------- ----------
Earnings (loss) from operations (36.9) 47.3 48.2 345.4
Other revenues - net 1.4 4.4 13.4 10.9
Interest and debt expense (24.3) (28.0) (110.6) (121.0)
---------- -------- ---------- ----------
Earnings (loss) before income taxes (59.8) 23.7 (49.0) 235.3
Income taxes (33.0) 8.3 (30.7) 82.5
---------- -------- ---------- ----------
Earnings (loss) before equity in net
earnings of investees (26.8) 15.4 (18.3) 152.8
Equity in net earnings of investees .9 1.3 6.0 10.8
---------- -------- ---------- ----------
Earnings (loss) before cumulative effect
of change in accounting principle (25.9) 16.7 (12.3) 163.6
Cumulative effect of change in
accounting principle (10.4) (2.4)
---------- --------- ----------- -----------
Net earnings (loss) $ (25.9) $ 16.7 $ (22.7) $ 161.2
========== ======== =========== ===========
Earnings (loss) per common share - basic:
Earnings (loss) before cumulative effect
of change in accounting principle $ (.26) $ .17 $ (.13) $ 1.61
Cumulative effect of change in
accounting principle (.10) (.02)
---------- --------- ---------- ---------
Net earnings (loss) $ (.26) $ .17 $ (.23) $ 1.59
========== ======== ========== =========
Earnings (loss) per common share - diluted:
Earnings (loss) before cumulative effect
of change in accounting principle $ (.26) $ .17 $ (.13) $ 1.60
Cumulative effect of change in
accounting principle (.10) (.02)
---------- --------- --------- ----------
Net earnings (loss) $ (.26) $ .17 $ (.23) $ 1.58
========== ========= ========= ==========
Cash dividends per common share $ .17 $ .17 $ .68 $ .68
========== ========= ========= ==========
Average common shares outstanding
(millions) - basic 99.1 99.4 99.1 101.5
========== ========= ========== ==========
Average common shares outstanding
(millions) - diluted 99.1 99.8 99.1 102.3
========== ========= ========== ==========
Mead Reports Fourth Quarter & Full-Year 2001 Results (page 7)
BALANCE SHEETS
(All dollar amounts in millions)
(Unaudited)
Dec. 31, Dec. 31,
2001 2000
---- ----
CURRENT ASSETS:
Cash and cash equivalents $ 51.3 $ 29.4
Accounts receivable 479.3 557.3
Inventories 539.9 561.5
Other current assets 106.4 133.1
-------- ---------
Total current assets 1,176.9 1,281.3
INVESTMENTS AND OTHER ASSETS:
Investees 67.9 31.0
Other assets 1,093.3 1,097.8
-------- ---------
1,161.2 1,128.8
Property, plant and equipment - net 3,128.9 3,269.9
-------- ----------
Total assets $5,467.0 $5,680.0
======== ========
CURRENT LIABILITIES:
Notes payable $ 91.1 $ 200.3
Accounts payable 188.4 255.6
Accrued liabilities 509.9 543.8
Current maturities of long-term debt 135.7 12.6
--------- ----------
Total current liabilities 925.1 1,012.3
Long-term debt 1,314.5 1,322.8
Deferred items 905.1 947.1
SHAREOWNERS' EQUITY:
Common shares 147.8 147.4
Additional paid-in capital 135.5 125.2
Retained earnings 2,076.9 2,172.9
Other comprehensive loss (37.9) (47.7)
--------- ----------
2,322.3 2,397.8
Total liabilities and shareowners' equity $5,467.0 $5,680.0
======== ========
- more -
Mead Reports Fourth Quarter & Full-Year 2001 Results (page 8)
SALES AND OPERATIONS SEGMENT INFORMATION
(All dollar amounts in millions)
(Unaudited)
Fourth Quarter Ended Full Year Ended
-------------------- -------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
---- ---- ---- ----
Industry Segment Sales to Unaffiliated
Customers:
Paper $ 399.2 $ 493.6 $ 1,784.3 $ 1,926.5
Packaging and Paperboard 352.8 373.9 1,516.5 1,612.2
Consumer and Office Products 182.9 177.4 875.7 829.4
---------- --------- ---------- ----------
TOTAL NET SALES $ 934.9 $ 1,044.9 $ 4,176.5 $ 4,368.1
========== ========= ========= ==========
Industry Segment Earnings (Loss) from
Operations before Income Taxes:
Paper $ (55.7) $ 28.9 $ (76.5) $ 181.9
Packaging and Paperboard 25.1 25.6 119.7 174.0
Consumer and Office Products 9.7 11.8 85.8 61.7
---------- -------- ---------- ----------
(20.9) 66.3 129.0 417.6
Other revenues (expenses) (.4) 4.5 (.5) 9.9
Interest and debt expense (24.3) (28.0) (110.6) (121.0)
General corporate expenses (14.2) (19.1) (66.9) (71.2)
---------- --------- ---------- ----------
Total corporate and other (38.9) (42.6) (178.0) (182.3)
---------- --------- ---------- ----------
EARNINGS (LOSS) BEFORE
INCOME TAXES $ (59.8) $ 23.7 $ (49.0) $ 235.3
========== ========= ========== ==========
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