Q3 2024 Earnings Conference Call and Webcast Slides
meadwestvaco 3Q07EarningsSlidesvFINAL102307
1. Primary &
Systems &
Insights & Packaging Secondary
Services
Innovation Materials Packaging
John A. Luke, Jr.
Chairman and CEO
THIRD QUARTER
2007 EARNINGS James A. Buzzard
President
October 25, 2007 E. Mark Rajkowski
Senior Vice President and CFO
2. Forward-Looking Statements
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 MeadWestvaco to realize improvements in operating earnings expected from the company’s
cost reduction initiative; competitive pricing for the company’s products; changes in raw materials
pricing; energy and other costs; fluctuations in demand and changes in production capacities;
changes to economic growth in the United States and international economies; government
policies and regulations, including, but not limited to those affecting the environment and the
tobacco industry; the company’s continued ability to reach agreement with its unionized
employees on collective bargaining agreements; the company’s ability to execute its plans to
divest or otherwise realize the greater value associated with its forestlands; adverse results in
current or future litigation; currency movements; and other risk factors discussed in the company’s
Annual Report on Form 10-K for the year ended December 31, 2006, and in other filings made
from time to time with the SEC. MeadWestvaco undertakes 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 the
company’s reports filed with the SEC.
2
3. John A. Luke, Jr.
Chairman and Chief Executive Officer
3
4. Third Quarter Summary
Nine Months
Third Quarter
Cumulative
3% 3% 6% 12%
2007 vs. 2006 2007 vs. 2006
Primary Primary
Sales Sales
Segment Segment
Profit Profit
• Packaging Platform performed well in difficult input cost environment
• Strong quarter for mill-based businesses
• Revenue and profit improvement in key consumer packaging markets
• Acquisition of Keltec and Hayes further strengthens positions in high-end
personal care and cosmetics dispensing markets
• Solid back-to-school season for Consumer & Office Products
• Specialty Chemicals performed well in face of challenging market
conditions; offset raw materials inflation with pricing actions
4
5. Key Highlights/Actions
Key Highlights Actions
- Keltec & Hayes Acquisitions
Profitable Growth - Wuxi Packaging Expansion
- Klabin agreement
- Long history of stewardship
Sustainability - Innovative sustainable solutions
- Focused on customers’ brands
Land Strategy - Completed forestland sales: $500mm
- Pursuing significant real estate opps.
Expect Improved Profitability in 2007
5
7. 7
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$40
$20
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$160
$140
$120
$100
$ millions
8. Packaging Resources
8%
4% 3Q07 vs. 3Q06
Segment Sales Segment Profit
$97 million
$779 million
• Improved pricing and increased productivity more than offset input cost
inflation
• Volume growth in targeted high-value grades – CNK and tobacco
• 4Q Outlook – Solid year-over-year segment profit growth. Expect to
overcome elevated input costs with price realizations, mix
improvements, and productivity gains
8
9. Consumer Solutions
13%
4% 3Q07 vs. 3Q06
Segment Sales Segment Profit
$26 million
$611 million
• Increased sales and improved profitability in media, healthcare, and
personal care businesses
• Lawn and garden business significantly weaker due to drought
conditions in parts of U.S.
• Higher resin and steel costs impacted profitability
• 4Q Outlook – Modest year-over-year segment profit growth. Expect
improved demand in lawn and garden, solid performance in beverage
and food packaging, and continued growth in personal care and
healthcare businesses
9
10. Consumer & Office Products
4%
1% 3Q07 vs. 3Q06
Segment Sales Segment Profit
$51 million
$334 million
• Improved mix and productivity gains led to higher profitability
• Solid back-to-school season from sales of Five-Star® and other
proprietary branded products
• 4Q Outlook – Segment profit similar to year-ago levels. Continued mix
and productivity improvements will be offset by lower volume and higher
input costs
10
11. Specialty Chemicals
7%
flat
FLAT 3Q07 vs. 3Q06
Segment Sales Segment Profit
$16 million
$131 million
• Price improvements more than offset higher costs for CTO and
other inputs
• Asphalt sales increased with late-season volume
• Carbon business impacted by continued weakness in North
American automotive sales
• Weaker housing market negatively impacting volume and mix for
certain pine chemical products
• 4Q Outlook – Segment profit similar to year-ago levels. Pricing
improvement will offset higher input costs and volume declines in
carbon and building materials products.
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13. Key Financial Information
3Q 2007 3Q 2006 Change
(In millions, pre-tax)
Sales $ 1,796 $ 1,751 3%
1
Adjusted Gross Margin $ 359 $ 344 4%
2
Adjusted SG&A $ 213 $ 199 7%
3
Profit from Primary Segments $ 190 $ 184 3%
4
Adjusted EBIT $ 157 $ 149 5%
Adjusted Gross Margin % 20.0% 19.6% 40 bps
Adjusted SG&A % 11.9% 11.4% 50 bps
1
Adjusted gross margin excludes restructuring charges and one-time costs of $15.8 million and $8.9 million for the third quarter ended 2007 and 2006, respectively.
2
Adjusted SG&A expense excludes restructuring charges and one-time costs of $9.5 million and $18.3 million for the third quarter ended 2007 and 2006,
respectively.
3
Profit from primary segments defined as the sum of the segment profits of the company's primary business segments (Packaging Resources, Consumer Solutions,
Consumer and Office Products, and Specialty Chemicals) and excludes Corporate and Other profit/(loss).
4
Adjusted EBIT excludes restructuring charges and one-time costs of $26.1 million and $27.2 million for the third quarter ended 2007 and 2006, respectively.
Adjusted EBIT also excludes interest income of $3.7 million and $3.4 million in 2007 and 2006, respectively, and a gain of $82.6 million related to the sale of
timberlands in the third quarter ended 2007. Adjusted EBIT includes remaining portion of Other Income/(Expense) after exclusion of interest expense.
13
14. SG&A – 3Q 07 vs. 3Q 06
$225
$213
$3
$4
($7) $8
$6
$ millions
$199
$200
$175
$150
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* Excludes pre-tax restructuring and one-time costs of $9.5M in 2007 and $18.3M in 2006
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16. Bleached Board
Shipments: 403,000 tons in 3Q07; down 2% vs. 3Q06
Pricing: Up $27 per ton vs. 3Q06; +3%
Backlogs: Currently over 2 weeks
• Markets generally strong in key grades
• Continue to look for opportunities to grow higher-value business
while de-emphasizing lower-value grades
• Pursuing additional price increases in targeted segments of SBS
business to offset higher input costs
16
17. Coated Natural Kraft
Shipments: 298,000 tons in 3Q07; up 6% vs. 3Q06
Pricing: Up $30 per ton vs. 3Q06; +5%
Backlogs: Currently over 2 weeks
• Solid beverage and CustomKote® demand drove increase in
shipments versus prior year
• Continuing to implement price increases for general packaging
grades
17
18. Unbleached Kraft Paperboard
Shipments: 203,000 tons in 3Q07; down 5% vs. 3Q06
Pricing: Up $26 per ton vs. 3Q06; +5%
Backlogs: Currently over 2 weeks
• Backlogs remain stable
• Price increases have been implemented, including Kraft
Linerboard
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19. Corporate & Other Reconciliation
Corporate & Other Reconciliation
($ in millions)
3Q '07 vs. 3Q '07 vs.
3Q 2006 3Q '06 2Q '07
3Q 2007 2Q 2007
Corporate & Other - As Reported (28) (116) (101) 88 73
Remove:
Restructuring charges 20 17 8 3 12
One-time costs 6 10 8 (4) (2)
Total restructuring & one-time costs 26 27 16 (1) 10
Subtotal (2) (89) (85) 87 83
Remove:
Pension credit (13) (12) (13) (1) -
Interest expense 55 57 56 (2) (1)
Interest income (4) (4) (4) - -
Land sales gains (88) (5) (5) (83) (83)
Corporate & Other - As Adjusted (52) (53) (51) 1 (1)
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20. Packaging Resources - Segment Profit
3Q 07 vs. 3Q 06
$140
$21 ($20) $8
$120 ($2) $97
$90
$100
$ millions
$80
$60
$40
$20
$0
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21. Consumer Solutions – Segment Profit
3Q 07 vs. 3Q 06
($4)
$2
$35
$30 ($10) $4 $26
$30
$ millions
$25 $4
$20
$15
$10
$5
$0
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22. Consumer & Office Products – Segment Profit
3Q 07 vs. 3Q 06
($2)
$11 ($3) $1
$60 $51
$49 ($5)
$ millions
$50
$40
$30
$20
$10
$0
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23. Specialty Chemicals – Segment Profit
3Q 07 vs. 3Q 06
$25
$6 ($5)
$20
$ millions
$16
$1
($1)
$15
$15
$10
$5
$0
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