Smurfit-Stone Reports 2nd Quarter Loss of $.12/Share; Significant Improvement Over 1st Quarter Results
CHICAGO, July 22, 1999 -- Smurfit-Stone Container Corporation (Nasdaq: SSCC) reported a loss before extraordinary item of $24 million, or $.12 per diluted share, for the second quarter of 1999, compared to a profit of $11 million, or $.10 per share, in the second quarter of 1998. Sales for the 1999 period were $1,730 million, compared to $764 million in the second quarter of 1998.
For the first half ended June 30, the company reported a loss before extraordinary item of $112 million, or $.52 per diluted share. This compares to a profit of $22 million, or $.04 per diluted share, prior to after-tax extraordinary charges of $13 million related to the early extinguishment of debt and $3 million for the cumulative effect of an accounting change in 1998. Sales for the 1999 period were $3,435 million, compared to $1,528 million in the first six months of 1998.
Smurfit-Stone's results for 1998 include only the results of Jefferson Smurfit Corporation (JSC), the predecessor of SSCC.
The current quarter's results include a gain of $24 million, net of taxes, on the sale of its remaining stake in Abitibi-Consolidated, Inc., in April, and expense of $16 million after-tax related to the exercise of options under the Jefferson Smurfit Corporation stock option plan. In addition, the company recorded after-tax charges of $2 million related to the shutdown of corrugated container and reclamation plants and $1 million related to the early extinguishment of debt. Excluding the net benefit of these events, the company reported a net loss of $.14 per share for the second quarter.
M. Curran, president and chief executive officer, said that although Smurfit-Stone reported a loss, the company posted a significant improvement in operating profits compared to the $.41 loss in the first quarter of 1999. He said the sequential improvement was primarily the result of an increase in the price of corrugated containers and a generally improving market for packaging. Curran added that prices for containerboard improved in all regions by the end of June. The company's shipments of corrugated containers declined compared to year-ago levels as a result of the merger of JSC and Stone Container Corporation, and the company's ongoing rationalization of its corrugated container business.
Curran noted that prices for recycled fiber, a raw material for the company's mills, rose dramatically in late May and June. Though the rise occurred late in the quarter, it had a negative impact on results of about $.02 per share. Old corrugated container (OCC) prices increased by as much as $35 per ton in some parts of the country and currently exceed $100 per ton in most regions.
Smurfit-Stone made continued progress on divestitures, debt reduction and synergies during the quarter, Curran said. "Proceeds from asset sales and operating cash flow enabled us to reduce debt by $459 million, to just under $6 billion, net of short-term investments, by the end of the second quarter," he said. In the first half, the company reduced debt by $586 million. Curran also reported that in the first half of 1999 the company achieved actual synergy savings of $113 million related to the merger of JSC and Stone Container. Curran said this is ahead of the $100 million target the company established at the time of the merger.
Looking ahead, Curran said, "We expect the market environment in the second half to provide strong support to our efforts to reestablish reasonable profit margins in paperboard and packaging. We noticed a marked improvement in demand for containers as we ended the quarter. Consumption of containerboard has been strong through the past two quarters, and board supplies are very tight. In addition, rising fiber costs, although they have a negative impact on costs, tend to go hand in hand with rising board prices. As a result, we expect our earnings to remain on an improving trend in the second half of the year."
New Director Announced. Howard Kilroy was named to Smurfit-Stone's board of directors at yesterday's board meeting. Kilroy served from 1989 to 1998 as a director of Jefferson Smurfit Corporation, the predecessor of Smurfit-Stone, and is a director of Jefferson Smurfit Group plc, Smurfit-Stone's largest shareholder. Kilroy joined Dublin, Ireland-based Jefferson Smurfit Group in 1973 and served as chief operations director from 1978-1995 and president from 1986-1995. He is governor of the Bank of Ireland and a director of CRH plc. Kilroy fills a vacancy on the board created by the retirement earlier this month of Richard W. Graham.
Archived Conference Calls. Currently online: Q2 Earnings Release 7/1999.
Section 1: Introduction (1 min. 28 sec.)
Section 2: Business Overview (6 min. 23 sec.)
Section 3: Finanicals (3 min. 23 sec.)
Section 4: Synergy and Merger Review (3 min. 15 sec.)
Section 5: Q & A (37 min. 31 sec.)
Entire event: 1999 Q2 Earnings Release (52 min.)
Adobe(r) Acrobat(r) version of the Consolidated Statements of Operations and Supplementary Financial Information (1,300k)
To obtain Adobe(R) Acrobat(R) Reader, click here:
Smurfit-Stone Container Corporation was formed on November 18, 1998 as a result of the merger of Jefferson Smurfit Corporation and Stone Container Corporation. The company is the industry's leading manufacturer of paper and paperboard-based packaging, including containerboard, corrugated containers, industrial bags, and claycoated recycled boxboard; and is the world's largest paper recycler. In addition, Smurfit-Stone is a leading producer of folding cartons, paper tubes and cores, and labels. The company operates about 300 facilities worldwide and employs more than 30,000.
This press release contains statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to changes in general economic conditions, continued pricing pressures in key product lines, seasonality and higher recycled fiber costs, as well as other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings.