Exhibit 99.1
MEADWESTVACO CORPORATION
and Consolidated Subsidiary Companies
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Introduction
On January 8, 2015, MeadWestvaco Corporation (the “Company” or “MeadWestvaco”) issued a press release announcing a plan to separate its Specialty Chemicals business from the rest of the Company. On January 26, 2015, the Company announced it has entered into a Business Combination Agreement with Rock-Tenn Company to create a leading global provider of consumer and corrugated packaging (“TopCo”). The separation of the Specialty Chemicals business is expected to be executed by means of a tax-free spinoff to the shareholders of TopCo (the “Spinoff”). The Spinoff is expected to be completed by the end of 2015.
The following unaudited pro forma interim consolidated financial statements give effect to the Spinoff. The pro forma statement of operations for the three months ended March 31, 2015 is based on the historical consolidated financial statements of the Company giving effect to the Spinoff as if it had occurred on January 1, 2015. The pro forma balance sheet as of March 31, 2015 is based on the historical consolidated financial statements of the Company giving effect to the Spinoff as if it had occurred on March 31, 2015.
The unaudited pro forma interim consolidated financial statements are based on the assumptions and adjustments described in the accompanying notes and do not reflect any adjustments for non-recurring items or changes in operating strategies arising as a result of the Spinoff. However, in the opinion of management, all adjustments necessary to present fairly the unaudited pro forma interim consolidated financial statements have been made.
The Pro Formas illustrate the financial characteristics of the Spinoff under one set of assumptions and do not purport to represent the results of operations and financial condition that actually would have been if the events described above occurred as of the dates indicated, or what such results of operations and financial condition would be for any future periods.
The unaudited pro forma interim consolidated financial statements, and the accompanying notes, should be read in conjunction with (i) the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, (ii) the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2015, and (iii) the Company’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on February 27, 2015 presenting unaudited pro forma consolidated financial statements giving effect to the Spinoff as if it had occurred on January 1, 2012 for the pro forma consolidated statements of operations and on December 31, 2014 for the pro forma consolidated balance sheets.
MEADWESTVACO CORPORATION
and Consolidated Subsidiary Companies
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | |
| In millions, except per share amounts | | Three Months Ended
March 31, 2015 | |
| | | Historical
Balances (e) | | | Discontinued
Operations
Adjustments (a) | | | Pro Forma
Balances (f),(g) | |
Net sales | | $ | 1,282 | | | $ | (239 | ) | | $ | 1,043 | |
| | | |
Cost of sales | | | 1,045 | | | | (169 | ) | | | 876 | |
Selling, general and administrative expenses | | | 159 | | | | (26 | ) | | | 133 | |
Interest expense | | | 52 | | | | (4 | ) | | | 48 | |
Other income, net | | | (18 | ) | | | 1 | | | | (17 | ) |
| | | | | | | | | | | | |
Income from continuing operations before income taxes | | | 44 | | | | (41 | ) | | | 3 | |
Income tax provision | | | 13 | | | | (12 | ) | | | 1 | |
| | | | | | | | | | | | |
Income from continuing operations | | | 31 | | | | (29 | ) | | | 2 | |
Less: Net income attributable to non-controlling interests, net of income taxes | | | — | | | | 1 | | | | (1 | ) |
| | | | | | | | | | | | |
Income from continuing operations attributable to the company | | $ | 31 | | | $ | (28 | ) | | $ | 3 | |
| | | | | | | | | | | | |
| | | |
Income from continuing operations per share attributable to the company – basic | | $ | 0.19 | | | $ | 0.16 | | | $ | 0.03 | |
| | | |
Income from continuing operations per share attributable to the company – diluted | | $ | 0.18 | | | $ | 0.16 | | | $ | 0.02 | |
| | | |
Shares used to compute income from continuing operations per share attributable to the company: | | | | | | | | | | | | |
Basic | | | 167.9 | | | | 167.9 | | | | 167.9 | |
Diluted | | | 170.8 | | | | 170.8 | | | | 170.8 | |
The accompanying notes are an integral part of these unaudited pro forma interim consolidated financial statements.
MEADWESTVACO CORPORATION
and Consolidated Subsidiary Companies
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
| | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2015 | |
| In millions | | Historical
Balances (e) | | | Discontinued
Operations
Adjustments (b) | | | Pro Forma
Balances Before
Separation
Adjustments | | | Separation
Adjustments | | | Pro Forma
Balances (f) | |
| | | | | |
ASSETS | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 262 | | | $ | — | | | $ | 262 | | | $ | — | | | $ | 262 | |
Accounts receivable, net | | | 688 | | | | (129 | ) | | | 559 | | | | — | | | | 559 | |
Inventories | | | 681 | | | | (139 | ) | | | 542 | | | | — | | | | 542 | |
Other current assets | | | 139 | | | | (6 | ) | | | 133 | | | | — | | | | 133 | |
Assets held for sale | | | 93 | | | | — | | | | 93 | | | | — | | | | 93 | |
| | | | | | | | | | | | | | | | | | | | |
Current assets | | | 1,863 | | | | (274 | ) | | | 1,589 | | | | — | | | | 1,589 | |
| | | | | |
Net investment in discontinued operations | | | — | | | | 442 | | | | 442 | | | | (442 | ) (c) | | | — | |
Property, plant, equipment and forestlands, net | | | 3,306 | | | | (416 | ) | | | 2,890 | | | | — | | | | 2,890 | |
Prepaid pension asset | | | 1,401 | | | | — | | | | 1,401 | | | | — | | | | 1,401 | |
Goodwill | | | 680 | | | | (12 | ) | | | 668 | | | | — | | | | 668 | |
Restricted assets held by special purpose entities | | | 1,258 | | | | — | | | | 1,258 | | | | — | | | | 1,258 | |
Other assets | | | 625 | | | | (19 | ) | | | 606 | | | | — | | | | 606 | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 9,133 | | | $ | (279 | ) | | $ | 8,854 | | | $ | (442 | ) | | $ | 8,412 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | | | | | |
Accounts payable | | $ | 519 | | | $ | (87 | ) | | $ | 432 | | | $ | — | | | $ | 432 | |
Accrued expenses | | | 322 | | | | (19 | ) | | | 303 | | | | — | | | | 303 | |
Notes payable and current maturities of long-term debt | | | 74 | | | | (11 | ) | | | 63 | | | | — | | | | 63 | |
Liabilities held for sale | | | 22 | | | | — | | | | 22 | | | | — | | | | 22 | |
| | | | | | | | | | | | | | | | | | | | |
Current liabilities | | | 937 | | | | (117 | ) | | | 820 | | | | — | | | | 820 | |
| | | | | |
Long-term debt | | | 1,810 | | | | (86 | ) | | | 1,724 | | | | — | | | | 1,724 | |
Non-recourse liabilities held by special purpose entities | | | 1,112 | | | | — | | | | 1,112 | | | | — | | | | 1,112 | |
Deferred income taxes | | | 1,319 | | | | (70 | ) | | | 1,249 | | | | — | | | | 1,249 | |
Other long-term obligations | | | 672 | | | | (3 | ) | | | 669 | | | | — | | | | 669 | |
| | | | | |
Commitments and contingencies | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | |
Equity: | | | | | | | | | | | | | | | | | | | | |
Shareholders’ equity: | | | | | | | | | | | | | | | | | | | | |
Common stock | | | 2 | | | | — | | | | 2 | | | | — | | | | 2 | |
Additional paid-in capital | | | 2,902 | | | | — | | | | 2,902 | | | | — | | | | 2,902 | |
Retained earnings | | | 857 | | | | — | | | | 857 | | | | (442 | ) (d) | | | 415 | |
Accumulated other comprehensive loss | | | (631 | ) | | | — | | | | (631 | ) | | | — | | | | (631 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total shareholders’ equity | | | 3,130 | | | | — | | | | 3,130 | | | | (442 | ) | | | 2,688 | |
Non-controlling interests | | | 153 | | | | (3 | ) | | | 150 | | | | — | | | | 150 | |
| | | | | | | | | | | | | | | | | | | | |
Total equity | | | 3,283 | | | | (3 | ) | | | 3,280 | | | | (442 | ) | | | 2,838 | |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 9,133 | | | $ | (279 | ) | | $ | 8,854 | | | $ | (442 | ) | | $ | 8,412 | |
| | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these unaudited pro forma interim consolidated financial statements.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Basis of Pro Forma Presentation |
The unaudited pro forma consolidated statement of operations of the Company for the three months ended March 31, 2015 is based on the historical statement of operations and gives effect to the Spinoff as if it had occurred on January 1, 2015. The unaudited pro forma consolidated balance sheet of the Company is based on the historical balance sheet as of March 31, 2015 and gives effect to the Spinoff as if it had occurred on March 31, 2015.
These unaudited pro forma interim consolidated financial statements are based on the assumptions and adjustments described in the notes to the pro forma adjustments and do not reflect any adjustments for non-recurring items or changes in operating strategies arising as a result of the Spinoff. However, in the opinion of management, all adjustments necessary to present fairly the unaudited pro forma interim consolidated financial statements have been made.
These unaudited pro forma consolidated statements of operations are presented for illustrative purposes and do not purport to represent what the Company’s results of operations actually would have been if the events described above had occurred as of the dates indicated or what such results would be for any future periods.
The unaudited pro forma interim consolidated financial statements, and the accompanying notes, should be read in conjunction with (i) the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, (ii) the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2015, and (iii) the Company’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on February 27, 2015 presenting unaudited pro forma consolidated financial statements giving effect to the Spinoff as if it had occurred on January 1, 2012 for the pro forma consolidated statements of operations and on December 31, 2014 for the pro forma consolidated balance sheets.
Pro forma adjustments to the unaudited consolidated financial statements are as follows:
| | (a) | Represents the reclassification of all revenues and expenses of the Specialty Chemicals business to discontinued operations. The measurement date for discontinued operations for the consolidated statement of operations was for the three months ended March 31, 2015. |
| | (b) | Represents the reclassification of all assets and liabilities of the Specialty Chemicals business to discontinued operations. The measurement date for discontinued operations for the consolidated balance sheet was as of March 31, 2015. |
| | (c) | Represents the removal of the net investment in discontinued operations as a result of the Spinoff. |
| | (d) | Represents the distribution of the Specialty Chemicals business common stock to the shareholders of MeadWestvaco. |
| | (e) | Represents the amounts previously reported on a continuing operations basis in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2015. |
| | (f) | Pro forma balances are presented on a continuing operations basis. |
| | (g) | Pro forma income from continuing operations before income taxes includes restructuring and other charges of $22 million for the three months ended March 31, 2015. |
