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
The following is a transcript of an analyst presentation given by The
Mead Corporation and Westvaco Corporation on November 2, 2001:
MEAD CORPORATION
Moderator: Jerry Tatar
November 2, 2001
10:00 a.m. EST
Mark Pomerleau: While you're all getting settled let me just make a few
introductory remarks. I'm Mark Pomerleau, Investor
Relations Director at Mead and welcome to our meeting
this morning. I also want to remind you that our
audience is larger than just New York. This meeting is
being made available by access by telephone as well as
on the web sites of both Mead and Westvaco. This
meeting though was scheduled originally about six
months ago for November 2 and following the
announcement of the proposed merger between Mead and
Westvaco we thought it was entirely appropriate to hold
it today as a joint meeting. And the focus of the
meeting will be on the merger to discuss the merger
itself. We will not really be focusing on the current
business of the current quarter, the fourth quarter for
Mead, which is underway. Or the fourth quarter for
Westvaco, which ended earlier this week and will be
reported on later this month.
I also want to remind you that today's discussion will
include some forward-looking statements and actual
results often differ. And I would just direct you to
the filed materials on both companies, the 10Q's and
the 10K's, the S4 and other filings with the SEC, for a
list of factors that can affect conditions going
forward. So let me introduce Jerry Tatar and John Luke
they'll do a period of discussion and then we'll open
the floor for questions. Jerry?
Jerry Tatar: OK. Thank you very much Mark. Good morning everybody
and thank you all for joining taking time out of your
busy schedules to be with us. It's been about a little
over two months since John and I announced the
initiative between Mead and Westvaco and as you might
remember we were very excited two months ago and the
thing I can tell you without any doubts is that we are
more excited today. And John and I have spent a lot of
time together in the last couple months and we've spent
time visiting investors and we've had a lot of
one-on-one discussions with investors. We've spent a
lot of time visiting employees from both of our
companies and very importantly we have spent a lot of
time with teams that we have put together. Integration
teams who are---who as we sit here are off working on
putting the plans together to take the concepts that
John and I feel so strongly about and turn them into
very specific action plans that we'll be ready to go
with when we get final approval on the merger.
So it's been a very interesting couple of months and
we've enjoyed a lot and we still have a lot of work to
do. What we'd like to do today is we're---many of you
have heard the general story but we're going to go
through it a little bit one more time. We'll just try
to hit the highlights though, because we've known
you've heard many of the details of this. And then
we're going to give you some of our initial
impressions. We've been working on this together now
for two months and so we'll talk about some of the
things we've seen and why we actually feel even more
positive today than we did down the road. And---and
then we'll try to end with your questions, which may be
the most important part. Because the one thing we want
to do when you walk out of here if there's anything on
your mind, we'd like to know about it and we'd like to
have a chance to respond to your questions.
So I'm going to get started. John and I are going to
bounce back and forth here, so let me just kind of get
started. This is a slide that we've been using which
basically describes why we're here. And so I'll just
kind of maybe give---this is the basic summary slide.
We are here because we think we are going to create one
marvelous new enterprise. An enterprise, a company that
is characterized by the markets that we choose to serve
that we are going to be in strong market position. We
will be leaders in the markets that we're talking
about, the basic, the core markets. Many of these
markets we're going to have a global reach in where
facilities matter. This company is going to have some
of the most world class, cost effective facilities in
the world. And it's really been great to go visit some
of these facilities because you are talking about just
world class type of cost structures at many of our
combined facilities.
You're talking about businesses that basically have a
value added tinge to them. And the reason that's
important is because we can say---we think we can turn
that value-added position into sustainable, good solid
return. Because many of our businesses we can take
advantage of creativity, innovation, product
development, and in things that we think that we're
good at, that when we come together we'll be better at.
In addition, that they are the kind of things that
characterize good, solid financial returns.
So when you cut through all this from the very one that
John and I started talking about this, our reason for
doing this is that we can create a company that can
live up to a promise that has been made maybe many
times in this industry. And maybe not fulfilled that
often but in this case we think we can generate and
develop a company that can make above cost of capital
returns on a sustainable basis. And we'll have the
portfolio businesses and the skills and the
infrastructure to allow us to do this.
Now, there are some additional pluses out of all this.
And one of them is that right out of the gate we can
get some significant cost savings. And we'll come back
to this but we---when we announced this we said we can
get $325 million, no funny money, it's all cash costs,
I'll show--we'll show that to you again later. And as I
said, right now that's where much of our effort between
the integral---in the integration team is focused. To
come up with a plan, the best cost structure, the best
organizational structure, the best processes, the best
suppliers and providers and goods and services. And we
have people working on that today to make sure that
this 325 becomes a reality.
In addition, because we're doing this as a merger of
equals we have a very nice plus which is the day we do
this we are in very good financial position. We are not
burdened with a great deal of debt. We are not burdened
with a lot of diluted shares. We have good financial
position right out of the start and it will get better
because we believe that we can reduce our capital
spending, we believe we that we can reduce our working
capital needs, and we will be monetizing some of our
assets. And so from a very good start, over time the
financial position will even get better. So we think
it's a very compelling story, a great reason for us to
come together.
And the last bullet on there is very important. There
are a lot of good stories out there in industry but
sometimes they don't come to fruition. And the reason
they most often don't is because the people can't get
it done. But what we've really seen in these last two
months has been very, very, very encouraging because
the---we know we have the skills and the
management---the combined management teams but the
thing that has been great to watch is the chemistry
among the people. In addition, it's very positive and
very much in line what we've got to talk about.
So that is the high level story and we'd like now to
take a little bit of time to step through that and then
we'll turn to your questions.
This is the transaction summary, I'm not going to dwell
on this slide. You know how we set up the deal so that
both sets of shareholders could look at this and say,
"Hey we're being treated equally." We think we've done
it with this particular equation. This is the 50-foot,
50,000-foot level of the portfolio. Four major
segments: packaging segments will be the largest. But
coated paper segment and the specialty paper segment
and the carbonless segment, which is all rolled in to
that paper area, is also going to be very substantial.
And then we'll have two other legs to this stool and
that is the consumer and office product segment and the
specialty chemical segment. And they fit that---that
vision that I was talking about earlier. They are the
kind of businesses that we have strong market
positions, great opportunities for organic growth on a
creativity and innovations and can make very good
returns on a sustainable basis for the foreseeable
future.
So we think we have a good portfolio to start with and
what I'd like to do is turn this over to John to kind
of lead you through this. And as you can see he's got a
big smile on his face and that's because he's happy
about this deal but he's the biggest Yankee fan I've
run into. So I know he enjoyed the last two nights.
John, I'll turn it over to you.
John Luke: Waiting until the 12th 13th inning is always tough for
a lot of reasons. As Jerry said, this is the platform
we're very, very excited about the platform. It is all
about generating improved quality of earnings, improved
levels of returns, and doing so by establishing and
really building on leadership position in attractive,
growing, and global markets.
As Jerry indicated, and as most of you know, the
largest of the segments is going to be packaging. A few
comments about this. What we're doing here is combining
two market leading businesses to create what we are
absolutely convinced will be the unquestioned leader in
high-end packaging on a global scale. What businesses
are we combining, complementary businesses. Westvaco's
bleach board needs CNK. Westvaco's high-end focused
consumer packaging, media and entertainment,
pharmaceutical and health care, cosmetics and personal
care in the high-end of the broad consumer packaging
market needs leading market leading and global beverage
carrier---beverage packaging business that fits very
nicely and is largely---roughly 65 percent integrated
with its coated paperboard production.
We've got efficiency in the platform. We have got
increasing globalization with packaging businesses in
Europe. Mead has operations in Asia. Moreover, of
course we have a good, strong platform at Westvaco in
Brazil. And we're looking at some very, very efficient
platform. Jerry alluded to this earlier, while the
focus is on markets and on generating returns, we have
a very strong base on which to do that. By our count we
have five of the roughly seven, perhaps eight most
efficient paper board making machines in the world at
Westvaco's mill in Covington, VA, Evadale, TX, and Mart
in Alabama. So we've got a heck of a platform on which
to build a very, very strong and cost efficient
business.
And I would note as we highlight here that we see
tremendous opportunity as well for cross selling. We
are constrained right now as many of you know and can
appreciate until we close this transaction from
comparing notes on customers. But just by looking
around we see a tremendous amount of opportunity for
sharing knowledge that will both enhance the revenue
profile as well as improve the cost efficiency of our
distribution assessments. And I would note as well that
it is all supported by a real bias toward innovation.
Paper. The second largest platform. Here we are going
to create what we feel will be, again, an unquestioned
new leader. We will have a broad product line something
that Westvaco was lacking. And this solves that issue.
We will be the second largest producer in North America
and with the changes we anticipate making, it will be
increasingly talking about, we will be without
question, the most efficient producer. We have strong
customer relationships through both companies, direct
contact with---relationships with customers as well as
Mead's merchant sales arm, which will enable some of
Westvaco's distribution requirements to be enhanced as
well.
And underpinning all of this as we move up the quality
chain is a substantial opportunity for cost elimination
through shutting down older, less efficient equipment.
And in the process, optimizing the balance of the mill
system platform ensuring that we are producing for
optimal results, the right grades at the right mills,
on the right schedules. So we see substantial
opportunity and we'll come back to this a little bit
later as we talk about the synergies.
The third segment of the business is consumer and
office products. This is a very attractive, growing,
and profitable business for Mead. I will ask Jerry just
to offer a few thoughts on that before coming back and
talking about Westvaco's chemical business.
J. Tatar: OK. John, thank you. Actually, as you notice this is a
pleasure to talk about. You've been watching Mead's
returns for this year, the consumer and office products
is just---the area is just having an outstanding year.
And those that have followed Mead kind of know our
story. For a long time we were the leader in school
products and about two years ago we made a major
acquisition, called AT-A-GLANCE, that brought us into
the time management area. We had a very crisp plan in
mind when we did that. We had a very strong position in
mass merchandising, AT-A-GLANCE was the leader in time
management, had a very strong position in the office
stationer channels.
We thought by bringing these two companies together we
would have a very strong market position. We would get
extra shelf space. We would be able to do some
cross-selling between the two channels that we had
strength in and we'd be able merge the two
organizations to get some cost out and get the best
people in place. And the story has been a great
success, we're having a record year this year and we
have a lot of neat products in the pipeline for next
year. It is in place again, where you can use
creativity and innovation and turn it into real money.
So it is a segment that's going to be pushing---be
pushing a billion dollars.
One thing as you know Westvaco has an envelope
business. We have not decided exactly how to deal with
that yet, but we're taking a strong look to see if that
envelope business can be brought in with the consumer
and office products. Develop some synergies to make
that work. We haven't figured that out yet, we're
working on it at the moment, but it is another possible
potential plus to this whole thing. It is a very strong
business with a very good history.
Next business you're going to see up there is specialty
chemical business that Westvaco has nurtured over time
and I'm going to turn this back to John. But I will
tell you one thing, I went with John on a trip to visit
Covington and we there to see the bleach board
facilities, but right in the middle of the facility is
this great chemical---a little chemical plant, which
starts with sawdust, a big pile of sawdust, goes
through some black box and out comes something that
they can sell for $3.25 a pound and I said, "I don't
understand what goes ---what goes on in that black box
but I like this business a lot." And John has been
trying to teach me but I think I'll turn it back to
him.
J. Luke: Jerry, thanks very much. Before jumping back to the
sawdust, I would note the other thing that I have
learned in part by learning about Mead's consumer and
office products business. But also, very importantly by
doing some of my own market research at home with the
kids is that in the consumer and office product segment
of the market place, particularly the school supplies,
Mead name is very, very powerful. And within the Luke
household this transaction is taken on an interest that
probably nothing else that I have done professionally
over the last 10 or 15 years has and it's all because
of this stuff. And while there may be a bit more magic
that goes into making carbon than a notebook, this
notebook, I was commenting to a group in Boston
yesterday as I had it in my hand, goes for about $4
bucks and that's pretty good price relative to the
cost. And I'm sure that is required to put it together.
Jerry mentioned carbon. Our specialty chemical business
as we've talked with many of you over time, is a very,
very attractive business. It is one that has been
somewhat stable in terms of its revenue profile but it
is a business that we see having tremendous opportunity
to grow. It is global, it is niche market, and I will
discuss it a bit more in a moment. I think the---one
way to look at it is that we've been able to, over the
years, take spent by-products of the forest products
industry. And largely the pulp and paper making process
and use them very, very efficiently. And in doing so,
applying research both in our processes and in our
products, understanding our markets to develop these
niche products that can be sold for very attractive
returns.
Sawdust to carbon is pretty good way to start. I think
it's probably about 5 years or so ago the sawmills
around Covington, VA that were always glad to have us
take away their waste sawdust from the mills. Finally
realized that we were turning it into black gold as it
was and they began to charge us a bit more. But
fortunately with what we were able to do in our
products, largely related to serving the automotive
market. We were able to continually improve the margins
that we were generating on products being sold to
Detroit.
As you know, this product is used for controlling
automotive emissions, we have virtually 100 percent of
the market in North America growing a share of the
automotive emission control market on a global basis
and we would expect to continue to build. There really
is no viable competition given the level that our folks
have been able to establish in terms of performance and
quality. And there are other markets like that whether
it is in producing asphalt emulsifiers, printing ink
resins, and the like. I mention each of these markets
is global, they're growing, and they have very
attractive double-digit returns.
We would expect as we survey the landscape to enhance
this business through select investment to support
organic growth and we also see an opportunity given
some of the restructuring that is taking place in our
market place today. To selectively acquire small
operations that would round out our manufacturing
platform and our go to market profile. Do we want to
buy all of IP's Arizona business? Or, all of GP's
chemical business? No. But if there are select portions
of those businesses that might support our business,
absolutely we do.
A business that is also very important to the combined
company is our forestry segment. And together we will
have 3.5 million acres of land, largely in the
Southeastern United States. But also with not in
substantial acreage in the Northeast and in the upper
Mid-West. We see substantial opportunity to revisit how
these lands are managed; we're exploring actively
managing them as a profit center, which is the manner
in which Westvaco has been managing its lands over
time.
We see a strong opportunity to apply a broad discipline
and productivity enhancement building on research that
both companies have engaged in and its proven
Westvaco's case in the Southeast to be particularly
effective. And we see with the possibility to overlap
at a very concerted effort to be disciplined in
determining what land is strategic and what land is
non-strategic to engage in proactive, monetization sale
of timberlands over the next 12, 24, 36 months.
This is going to be a very powerful platform. One that
has substantial opportunity for optimization, for cost
efficiency, and for the support of leading market
positions. It is one that we think can really redefine
the landscape in this industry and do exactly what
Jerry said, generate substantial---substantially
improved returns and do so on a much more stable basis
as we go forward.
Coming out of the box, we have with the announcement
identified $325 million in operating synergies, as
Jerry outlined, and as many of you've heard before,
these are hard cash savings. And as Jerry will
describe, we are absolutely committed to achieving
these savings and doing our level best to exceed the
timeline we have set for ourselves. And having done
that to both exceed the absolute dollar level that we
had targeted and the timeline as well. So Jerry why
don't you pick it up and talk from here.
J. Tatar: OK. Thank you John.
J. Luke: Sure.
J. Tatar: And we'll get John back up here to talk about some of
the impressions we've had in these first couple of
months. But what you just heard from myself in summary
and then John in detail here is really why we're here.
This---this the four segments that you talked about, we
believe are the---give us the ability to create a
business that really can make strong returns over time.
But there are some nice pluses to this and a big one to
get started with and to make sure that we have the full
credibility of our organizations in the outside world
are these----are these synergies.
Let me just go over how we did this. John and I talked
a lot about the concepts, why we wanted to do this,
bring this together. But in the three or four weeks
before we announced this we bought our senior
management teams together, made them part of this whole
thing and asked them to get some skin in the game and
help us try to quantify what were thought we could do.
And they worked very well, very---they worked terrific
together. And so when we announced this we said, "Look,
we'll put this stake in the ground, $325 million will
do it. Cash costs will do it within two years." We also
added that we know we can reduce capital spending, we
just weren't ready to quantify it yet. We knew we could
reduce working capital, we weren't ready to quantify
it.
We also knew that the other kind of synergies the ones
that John alluded to, those ones that are a little
less---more difficult to quantify at this moment. Maybe
deal at more markets etc. and we said we're going to go
after those things too, we're just not ready to
quantify it. So on this list up here, lists all those
possibilities. And as I said, we now have and have had
for some weeks now. We have a steering committee for
integration in place; we have teams that are made up of
members from both Westvaco and Mead working on each of
these items. And we fully expect by the time we reach
the official merger that we will have most of this
groundwork down. There are few limits on what we can do
as far as some of the market things are concerned,
legal limits. But notwithstanding that anything else
that's doable we've got people working on.
Let's---let me show you what we---how we came up with
this. This is the 325 and it's broken into four boxes
here, paper, packaging, purchasing, and logistics, and
corporate overhead, and IP. But there are basically
three things in there. There is the elimination of
duplication, which would show up in the corporate
overhead line, the packaging line, and the paper line.
There is using leverage, which shows up in the
purchasing area and the logistics area because we buy a
lot of the same things and we ship over a lot of the
same routes. And so we put some money in that box.
And then the third one is up in the paper area that
really deals with optimization of the paper system.
This is very straightforward; we're going to have some
overlapping grades that we make. And so a machine that
now makes grade A and B, we're going to focus it on
grade A. And when you do that you'll get a lot more of
grade A off of that machine and the same thing will
happen on the other machine where we focus it on grade
B. And what we'll be able to do is shut down and take
out of commission some of our older less cost-effective
facility. And we'll do that and the equation we used
was that we'll get the same amount of capacity off of a
lot fewer machines and all that savings will drop to
the bottom line and it's bodied in that.
And that's the concept, we did some preliminary work
and then again we have a paper team together right now
working on some of this material. So when we get the
ground we'll have the detailed plans behind this and
then probably on a quarterly basis when we show up at
meetings we'll have another column and it'll show how
we're doing against those---against those numbers. And
we'll probably, I would assume, have added some rows
about some other things that we can bring to the bottom
line.
J. Tatar: This is something that's very important to us. We have
our core businesses outlined. They---we believe very
strongly that they fit this criteria, they have a
strong strategic fit, they give us the chance to have
good customer relationships and grow with those
customers. And above all, as I said at the outset, we
think that this combination can make good financial
returns.
Now there are some parts of the combined company that
we're going to take a look at because we're not sure
how well they stack up against this criteria. John
mentioned woodland; I've talked about paper. I
mentioned the envelope before. We will also look at our
sorted container board businesses and make sure they
fit. And if they don't, we'll take action accordingly.
And so early on in this process we'll be doing that
work and we'll keep you all posted about how we see
that thing transpiring. Certainly we'll do---we'll make
these decisions within first 12 months.
J. Luke: Well we think we have well we believe very strongly we
have is a cash generating machine when we get this
thing rolling. Good returns, strong financial position,
we'll monetize some of these assets, so we're going to
be in very good position. What are we going to do down
the road as this cash evolves? We basically are going
to look in three directions. First off, we have decided
we're going to keep the balance sheet in good shape. We
are going to make sure that we maintain our financial
flexibility and that we have an investment grade type
balance sheet. And we feel very strongly we'll be able
to do that.
We're going to be blessed because we don't think we're
going to have spend a lot of capital. We certainly have
no plans to build anything of any major significance.
Our mills, as John indicated, are in very good shape
both maintenance wise, environmentally and from a cost
structure. So we think we can go through these first
few years and capital spending can be at a fairly---a
fairly low level. Right now our depreciation levels are
about $700 million combined, this year together we'll
spend about $550. We don't know exactly how far we can
drive that down but we'll drive it down and we'll keep
you posted as we make those kind of decisions.
We certainly feel free and would be able to make some
targeted acquisitions. We'll continue to look in
packaging, we'll continue to look at specialty paper,
we'll continue to look at consumer and office products
and specialty chemicals. We don't think in that---in
that mix is any major, really large acquisitions. Now
in terms of defining the acquisition size, I guess we
could discuss this --- I certainly we don't see
something that'd be a billion dollars plus. But we
certainly could see acquisitions, $100 million here,
$150 million there, $25 million there, $300 million
there. If they make sense in those particular areas.
So, we'll go about that just as Westvaco and Mead have
done individually with great discipline.
On the paper side we certainly don't see anything there
in the early parts of this. We're going to have our
work cut out for us bringing the two businesses
together to extract the synergies because as you saw,
that's where a lot of the synergies are. Then we'll
have our new vantagepoint and then we'll see what we
need to next. But in the early parts of that we'll
focus on paper and getting the---getting the
integration complete.
J. Tatar: And we still believe there's going to be opportunities
for cash usage and where we'll turn to is giving that
money directly back to shareholders. Either through
increased dividends or through share repurchases. And
you know Mead has had a lot history of share
repurchases, John and I have had many discussions about
this. He's completely at ease with that's the right
thing to do and doing and making investing in ourselves
and that is where the quantification points us to, we
will be glad to go through those kind of things. So
that's kind of how we'll look at the world as we get
this---get this thing underway.
So I've kind of come full circle. We feel the
[unintelligible] business case is compelling. As we've
been involved in this it gets stronger and stronger.
And really the reason behind that is because of the
people's names that are on this chart and the other
people that we've seen in action at Mead and Westvaco.
We have some very strong piece skilled people and their
attitude and their chemistry on this thing is extremely
good. And their job is to find the best organizational
approach, the best processes to put in place, and the
best providers of either products or services. And that
could come from Mead, it can come from Westvaco, or it
could come from completely new thinking. And we have
made it very clear that tradition is not the basis of
any decision here. The only basis of decision is value
created by whatever we're going to put in place. People
understand it, they believe it, and they're working
that way. And with that I think I'm going to turn this
back to John to give you just a quick overview of some
of our early impressions and then we'll turn to your
questions.
J. Luke: Jerry thanks very much. Just building on what Jerry is
saying. I just can't underscore enough the positive
attitude, which exists in both the Mead and Westvaco
organizations. There is great enthusiasm about first
and foremost creating this new enterprise. There's a
real focus and understanding on an increasing basis at
multiple levels in the organization about the power of
this new enterprise and the true leadership positions,
which can be either achieved or extended for the new
company. But there is also very clear and compelling
focus as these teams come together on achieving the
$325 million in cash savings, recognizing that that is
the equivalent of $1 per share of the combined
company's stock. Our earnings and---was at that is a
level that given the reality of the economy today and
the opportunity to go that extra mile that we see a
level $325 which can clearly be exceeded.
Since we announced this moving forward with great
momentum and some---in each case pursuing plans that
each company had separately underway. There is
momentum. It reflects the kind of momentum that you
clearly can expect to see following the completion of
this transaction. Mead has closed a consumer and office
products plant, announced the restructuring in fail of
Gilbert and has made some other changes in its consumer
and office products business.
Westvaco has announced the closure of our Tyrone, PA
mill. We have engaged in market driven restructuring of
some of our consumer packaging businesses and we have a
number of other organizational reduction initiatives
underway as well. But again, this is just the beginning
of what you can expect to see from the combined
business going forward. As we go forward and this
relates back to a couple of comments I made just a
moment ago, we clearly went into this recognizing the
potential to become an under paralleled leader in the
packaging markets. All of that, virtually everything,
that certainly I and I think Jerry would agree, that he
came into this with has just been enhanced. There have
been no negative surprises it's all been on the upside
in terms of potential.
We can really be a leader in packaging. We see
substantial opportunity to leverage off both company's
biases towards innovation. We see tremendous
opportunity to leverage off the multi-substrate, the
multi-material orientation and packaging that Westvaco
has gotten into in response to customer needs and
market requirements in recent years. I alluded earlier
to the tremendous opportunities that we have both in
terms of monetization as well productivity enhancement
in the forest.
Jerry alluded to IT related savings in his review of
the synergies but I would note that an area that has
been very gratifying, still has to be quantified, is
the fact that about 2/3 of the way through our
pre-announcement discussions, Jerry and I both realized
that we were implementing SAP systems. And there is a
substantial opportunity given the disparity and
timeline that both companies are operating on, Mead a
little bit ahead. For us to save a substantial, to be
quantified, amount substantial amount in that
initiative and that will be additive to the $325.
And lastly, just closing the loop. The teams are very
focused and very enthusiastic and committed to
achieving more than they have been tasked with
achieving. So that is it. We would be happy to address
any and all questions that you have. Thank you.
J. Tatar: Thank you John. Maybe if I might just a couple
comments. Those that are in the room that are here when
you're on your way out; we have a pretty nice display
of the range of things that this combined company can
do in packaging. That's why we feel very good about
using the words powerhouse in packaging. As you can
see, the design characteristics back there that
Westvaco has nurtured over the years and you can see
the systems type of work that Mead has nurtured over
the years. And the excitement about trying to bring
those two skills together and go to customers with the
best of both of those things is really palpable on the
organization. And so we wish we could be getting
started on this tomorrow but we're going to have to
wait a little bit longer. But that display, I think, is
very positive.
The other thing that occurred to me while John was
talking a little bit was we're clearly in a challenging
time right now from an economic perspective and
certainly we think things are going to start getting
better hopefully next year. And when you think about
the fact that we're going to be bringing these
companies together at kind of the same time we will
hopefully by synchronized with that so we're looking
forward to kind of getting a double tick in the next
couple of years. One based on the old-fashioned way,
we'll do it through structuring the cost and getting
those synergies. And the other we'll hopefully have in
some wind behind our back as far as the markets are
concerned.
And then last thing I'll leave is John and I, we both
had our board meetings last week, independent board
meetings at this point in [inaudible]. But we were
comparing notes after the meeting and let me I guess
end with this from our comment perspective that both
boards are extremely---continue to be extremely excited
about--about this merger and about the potential and
the opportunity. But the advice they gave both of us
was very clear. Since you've got kind of once in a
lifetime opportunity to take a company, take these two
companies and create a cost structure and take
advantage of these marketing opportunities that we're
alluding to and really create a company that can make
good returns, decent returns even in the worst of
times, and then ride those things off as the markets
get better. And we really do believe we have that
potential from both the cost structure perspective and
the market side of this. And [inaudible passage] but
make sure that everybody else understands that
potential.
J. Luke: Yes I would just way that there's great enthusiasm. As
I said earlier on the teams, is they pursue these
objectives, they recognize while there are a lot of
dark clouds out there that the dark clouds do provide a
back drop and indeed an imperative for making very,
very disciplined and aggressive decisions as we shape
this new enterprise. So that's what we're all---that's
what we're all about. As Jerry said, we wish we could
flip the switch and start tomorrow but there is a lot
more integration work to be done and we will be ready
at the time we close the transaction. Several have
asked when we think that will be. We'll have a better
feel next week when we get our comment on the S4 back
from the SEC. But assuming that there are no unusually
owner risk obstacles tossed up by the commission we
certainly would hope to be in a---on a timeline that
would enable us to complete the transaction before the
end of the calendar year. So that we can start fresh on
January 1.
J. Tatar: Now we'll turn to your questions. I should note though,
that [unintelligible] We've got Karen Osar and Tim
McLevish behind us here on the stage.
J. Luke: And we also have Mark Pomerleau, We've got Roger Holmes
and Kathy Weiss from Westvaco's IR staff, so we've got
all kind of help here. The other thing, since this is
being taped, we'll try to paraphrase your questions,
which will be great because it'll help us with the
questions in the way we could probably answer them. So
but---who has the first question? Go ahead Mark
Connelly.
Mark Connelly: [inaudible passage - Is the paper business core to the
new company?]
J. Luke: I think you missed that, I think you missed the paper
segment because we're thinking coated paper, we are now
leadership position North America and specialty paper
we're clearly in a leadership position in the niches
that we have. So we view it as coated paper, we view it
as packaging; we view it as consumer and office
products, specialty under paper and specialty
chemicals.
Mark Connelly: [inaudible passage - reiterates question about whether
paper business is core]
J Tatar: You're talking about coated? No, I think what we said
is we're going to focus on getting the integration done
in the early part of this thing. That's where most of
the benefits are, that's where most of the---or at
least the good portion of the synergies are located.
We're going to be creating the leader or close to the
leader in the North America coated paper market. And
we're going to have a wonderful new vantagepoint. So
that's clearly where we're at and then as we've always
said there are issues down the road about the global
nature of that business. And we'll take a look at that
and see how best to play that game down the road, but
as we start this, we're---those four segments that we
outlined there are the basic core business. John?
J. Luke: No, I think you've summarized that well. We may if
our---this impressions we've given about the commitment
to coated paper we should address those but I think
clearly the high-end packaging market, the coated paper
market with the North American focus given what we're
creating, consumer and office products, nurturing,
building, growing with Mead's very strong position. And
then pursuing the path that I outlined earlier in
specialty chemicals building on Westvaco's position is
the direction of the new company.
J. Tatar: OK.
Mark Connelly: [inaudible passage: Can we assume you'll be
re-evaluating your position in paper?]
J. Tatar: You're talking about coated papers?
Mark Connelly: [Inaudible passage: Re-iterate question about
re-evaluating position in paper?]
J. Luke: Yes you can but let me also answer this way. Today we
all are reminded for a lot of reasons that change is
upon us in a tumultuous ways. And one of the things
that we have learned and are determined to do
differently than perhaps you could say these two
companies have, and perhaps others in other industries
have, is remain unalterably committed to any business
that may not have a future. We are going to represent
here businesses that maybe core today that two years,
three years, five years, down the line do not generate
the returns we believe our shareholders should aspire
to achieve. We will revisit with determination. That is
what we are committed to doing. But going out of the
box we are absolutely committed to doing what is
necessary to make the four core businesses we have
identified be leaders and generate the returns that
they should.
J. Tatar: And I probably was mislead part is that I was trying to
outline in the first part of this where will our focus
be and what will we be doing? And in coated paper that
is the one segment here that requires a tremendous
amount of energy to bring two already large businesses
together and---because there is a tremendous amount of
overlap and we've got to extract that value. And that's
going to take some time and effort.
J. Luke: Yes and we see Mark to---at this stage of the game with
the restructuring, the optimization, and the great
profile we have the clear opportunity within 12 months,
maybe 15 months, but targeted within 12 months, to be
the lowest cost producer of the highest quality
collection of products in North America.
Chip Dillon: [Inaudible: Questions about synergies and about IT
systems]
J. Luke: Chip, is asking questions about the synergies and
what's included and what's not included in IT in
particular and he happened to be glancing at our CFO's
up there. So since you were glancing that way I think
we'll be very pleased to let them respond to that.
Karen Osar: I'll do the synergy one and let you take the second
one. On the synergies, as we work through this the one
area where we felt there was a synergy that we would
include in the $325 are the benefits from closing our
Tyrone facility. The reason for that is that the full
benefit that can be realized won't be realized until we
complete the integration with Mead. We have an
opportunity in aligning with Mead to produce the same
amount of product of coated paper without the two
machines and the Tyrone facility and yet still reach
all of our customers and serve them. We could not do
that at Westvaco on a stand-alone basis. Tim?
Tim: With regard to the question on the ERP, you're right.
We are probably three years into a four-year program.
Maybe a little bit short of that and had anticipated
that in the next coming year that we would have kind of
reached the cross over point where the benefits would
start to exceed the amount of cost associated with
implementation. Westvaco is a little bit behind us;
they're probably a year behind Mead, so their cross
over point probably is another year out.
And exactly as we integrate them certainly, there will
be some shared learning across---from both directions
but because we are a little bit ahead, we think that we
can expedite and we can make it a more effective
implementation so we can bring some benefits to that.
But again, considering that they are a year---year back
it'll probably---it will probably delay cross over
point in the combined company. But we should be able
towards the end of the year probably towards the early
2003 reach that cross over point.
Chip Dillon: [inaudible passage - Question: Where does Westvaco
stand on its current cost savings program?]
Woman: We are fundamentally complete on previously announced
cost reduction programs except for the full realization
of the synergies from the Evadale acquisition. And we
are mid-stream with major customers that we serve from
Covington in a testing and review process, which is
moving along very nicely. And so we're still moving
into an environment whereas we'll get approval from
these customers we can get some of the benefits from a
lower cost fiber base and lower transportation costs in
serving some of our key Covington customers from
Evadale. So those are still---some of those are still
ahead of us.
Chip Dillon: [inaudible passage - Question: Are these included in
the $325 million synergies?]
J. Luke: Yes, those are not included in the $325.
Karen Osar: Exactly. I might just add on the systems environment
we're finding at least at this stage of integration the
fact that we are both moving on to the same systems
platform and all of our people in the financial and
technology world are speaking the same language. It's
really helping us on all the integration questions that
relate to technology and financial reporting. So that's
been a benefit as well.
J. Tatar: It was a nice plus when John and I were talking about
this and we found out we were both in installing SAP.
It's a very nice plus in comparison to trying to
install two different systems.
Peter Ruschmeier: [inaudible passage - Question: How do you look at the
position of Consumer and Office Products in the
portfolio of the new company and explain more on your
position on how you will look at owning timberland in
the new company?]
J. Tatar: Let me---I'll deal with the question Consumer and
Office Products and maybe you can take the woodlands
question. Let me get back to kind of where we started
when we said what our aspirations of the company. And
we basically start with the fundamental belief that
we're trying to create a company that can make good
strong returns on a sustainable basis under an umbrella
of the merger of equals. And we selected that
portfolio, those core businesses, the paper segment,
the packaging setting, consumer and office products,
and specialty because we firmly we believe they each
have the characteristics that can do that over time.
And there certainly is a---was a set of value added
tinge to this, there's certainly a strong customer
marketing tinge to this, and our view is consumer and
office products fits that quite well over time. And
they sell consumer products; we're going to be working
very hard with customers to show them how to package
their consumer products, to promote them out in the
market place.
And actually I'll tell you a little story because as
you get to meet these people it's great. Some of you at
Westvaco know a fellow by the name of Richard Block
who's kind of been a leader in this consumer packaging
area. And I had a chance to talk with him and he's a
materials boss. I mean he's really good at this. And
besides packaging he says by the way, he says, there's
some great materials that you can use in your school
supplies and I need to go talk to the president of your
division over there. Because if you use this material
it'll really be a particular positive thing for the
kids and that type of thing. So I---again I think it's
based on our vision of what we're trying to create but
I do believe even between consumer and office products
and some of these other businesses there's going to be
some nice overlaps and synergies. John do you want to
talk about woodlands with them?
J. Luke: Sure. Pete, I think the answer to the timberland
question is one that is very much a work in progress.
At Westvaco in the last few years, we have undertaken a
very determined review to decide what is strategic and
what is not strategic. And if we want to say how much
is enough we certainly, given the financial
opportunities that we've looked at, are stretching to
say we ought to be able to get by with 75 percent maybe
as little as two-thirds of what we pleasantly own.
Given the productivity improvements we've been able to
engender on our land. As we begin to work much more
closely with Mead organization and that work actually
has begun this week in the forestry integration teams
have begun to engage in this process. We will have a
much better fix on what is needed and what is not
needed.
Ultimately, the question is going to determine---be
determined by land productivity but that certainly is
going to be added in the future. In the nearer term it
is going to be able to be determined by the mix of
financial vehicles that we can get comfortable with
that would let us reduce land holdings even more.
Frankly, one of the things that we have found at
Westvaco certainly is that we have not been able to
identify except in a few discreet cases, opportunities
to monetize and still have long-term rights to pulp
wood off the land. And we really don't want to for
short-term gain, put our mills in harms way. So it's
finding that balance.
We have, I would note, however been able at Evadale as
you knew a structure a very long-term arrangement with
Temple Inland so we have no land ownership in Texas.
And we get the wood on a market price basis for a very
long-term commitment. And we've been exploring in parts
of the Appalachian Region with different investment
groups opportunities where they would buy the land,
take the high quality saw timber off the land and let
us have residual rights to the pulp wood.
As we can structure creative arrangements like that and
bring those together in tandem with productivity
improvements we will look with determination on a
continuing basis. But as we get into the first 12
months following closing we will be talking much more
fully and descriptively about what we're seeing with
the combined 3.5 million acre land base. And talk about
that in the context of the other restructuring
initiatives that we have.
J. Tatar: If I could just add one thing, which is one of the neat
things is that as we've gotten into this, both of our
companies have focused on forestry and productivity in
this force. Westvaco has been a particularly strong in
this. But as we do some cross-learning here, the faster
we can grow the trees the less land we need.
J. Luke: Right.
J. Tatar: So we think that's going to be part of the equation.
J. Luke: Yes the bottom line is that we don't want to own any
more trees than we have to. Jack?
Chad Brown: [Inaudible passage - Question: Where do profits from
woodland operations show in the company financials?
Will woodlands be operated as a profit center?]
J. Luke: Well that's a matter for discussion at this stage of
the game. I would note without in any way wanting to
presuppose the outcome of the recommendations of the
integration team know that at Westvaco we have had
very, very satisfactory experience in managing our
forest lands as a profit center. As opposed to having
them be viewed as a cost center in a mill operation.
J. Tatar: And at Mead historically we've had the operations
within the division so they would be the profits or the
cost structures would show up within the different
segments. So there'd be some of it in paper and some of
it in the paperboard and packaging segment.
Chad Brown: [Inaudible: Woodlands question re-iterated.]
J. Luke: So---and we have found that that profit oriented
focus assures that the kind of things we're talking
about here, are really examined as a business unit is
evaluated. And it's not simply again, what Mead has
done Westvaco did for a number of years. And it's been
done successfully in many other companies. So there's
no perfect or right way. Our experience would say that
there is an inherent bias toward mill managers in every
company in this industry to have a much more secure
fiber supply than really needed.
J. Tatar: Wow, Rich.
Rich Schneider: [Inaudible - Question about Westvaco's Brazilian
operation.]
J. Luke: Let me start--- and could you, Jerry, repeat the
questions, OK.
J. Tatar: OK. Asked about Brazil and John why don't you take it?
J. Luke: OK. I alluded to Brazil before, Rich ,and I'm glad you
brought it back up. Brazil has been a wonderful base of
operation for Westvaco over the years. It is a good
business. It's been managed exceptionally well, we've
been able to continually upgrade on the product mix
from standard brown boxes to a much higher quality mix
of yes, brown boxes, but display business and now we've
enhanced that with a very attractive increasingly
upscale carton of water packaging business. And Mead
has a presence there as well in the beverage packaging
market.
Brazil is, despite all the difficulties the country has
encountered over time, the engine for growth in Latin
America. The world is recognizing that Latin America
has tremendous market growth potential and we are going
to go into this combination with a view that Brazil and
Rigesa, Westvaco's platform in Brazil, is going to be a
wonderful platform from which to grow. Again, grow in
higher end packaging markets bringing solutions to
those markets as they grow. We see that as a
powerful----.
J. Tatar: Yes from what I've seen I agree with that 100 percent.
Again, we're talking about trying to make good returns
over a sustainable periods of time. This certainly fits
that, certainly fits our view of trying to upgrade
packaging because it's nice to have a significant base
in South America to work from. To go into places like
South America without any substantial base to work from
is always tricky. With this as a base, we can do some
other things down there too.
Now you're asking about I think maybe special charges
and that type of thing as far as this is concerned. I'm
going to turn this over to Tim and Karen. But a couple
of things, I don't think---we're not ready yet to say
what the working capital increment will be, how much we
can reduce it. We know we're going to get some but the
teams are working on it and I'm sure we don't want to
prejudge that. So we'll have that in due course how
much money that might be. And we're going to be taking
a substantial charge when we do this but then I'll turn
it over to the CFO's to add a little flavor.
Karen Osar: Just on Tyrone. It's $65 million charge that we
discussed in a recent press release, relates really to
a broad range of actions. John discussed from a
rationalization of our consumer-packaging network and
also some other things that we had in mind related to
administrative charges in some of our divisions. So
that's not all related to Tyrone.
In terms of restructuring charges themselves for new
actions taken to achieve synergies, we have not yet
come up with an estimate that we really would be
comfortable communicating. Most of the restructuring
charge should be related to headcount reductions that
would come out of the overlapping businesses, the
overlapping staff groups and within the coated paper
segment where there'll be people overlap. With respect
to those restructuring charges the vast majority on the
Westvaco sides to the extent that it's Westvaco
employees that are included would be non-cash because
we have the ability because of our pension surplus to
charge a good deal of the severance charges directly to
our pension plan. So while the charge would go slow
through the income statement it would be---not be
funded out cash from operations but would be funded
directly from the pension plan to a large degree. We're
investigating - Tim is investigating - the feasibility
of whether that can be done within Mead.
Tim McLevish: Next in terms of working capital, Jerry's right. We
have not gotten down the road as far as we need to be
able to publicly disclose the amount of working capital
savings. But as you probably know in part because of
the difficult economic times the difficult industry
times, certainly the Mead side of it I think the
Westvaco's sides in, but there---working capital is
higher than we would like. Clearly within the coated
paper segment as we bring those two businesses together
there will be appreciable savings in inventories. And
as we implement our ERP systems across the entirety of
the system and get better sales and operations planning
we would expect to have an appreciable and beneficial
impact from inventory reduction there as well. But we
are to the stage where we're prepared to quantify that.
J. Tatar: OK. Yes sir.
Man: [Inaudible comment - Question: will the amount of
synergies realized depend on market conditions?]
J. Tatar: OK. Let me try that. CFO's can correct me if I get this
wrong. But fundamentally the money we're talking about
is a reduction of where we are today. There maybe a
few---there maybe some minor exceptions to that but
they are---as you recall they have three kinds of
things. They are the elimination of duplication. So, if
we have department A at Westvaco and department A at
Mead and we're going to combine both and we're going to
have a real cost reduction.
On the issue of purchasing leverage, one thing I'm sure
of, one of us is paying a higher price and one of us is
paying a lower price. There's a high profitability we
can get the lower price. So and maybe get something
from that so that is a real cash cost reduction. And on
the issue of the optimization of coated paper business
where there's this tremendous opportunity to bring that
cost structure down, it is literally eliminating
machines that we presently have in the system. And the
cost associated with that. So those costs we presently
have and the come right out of the system. Now there
will be some of the things you're talking about like in
ERP, we have plans to spend a certain amount of money
and by coming together we'll be reducing those costs.
But the major, major portion of this is cash cost that
we both experience.
J. Luke: Yes and I would just supplement that by saying that we
felt that when it isn't credibility important
deliverability is key. And that's we have got a number
that we're very comfortable with, hard cash,
elimination of current cost. Clearly there will be
added to things like DSAP, there'll be substantial
synergy strategic synergies that come from very real,
hard things like cross selling, and there'll be other
opportunities through process and product development.
So there's going to be substantial opportunity and
we'll talk about those as we go forward. And we also
believe there'll be more cash savings to add to the
$325. But we want to really be sure that the folks who
are going to tasked with getting this job done for us
and those of you who are going to be keeping our report
card, understand what it is we're doing and how we're
going at it.
J. Tatar: We're getting close to our allotted time, but we have
time for a couple more questions.
Mark Connelly: [Inaudible passage - Questions: The strategic review of
the next 12 months?]
J. Luke: OK. The question is the restructuring or strategic
review over the coming 12 months. And I think we, on
this, there's been a lot of question as to what we
really mean, so I'm glad you brought this up. We commit
to undertake a review as early in that 12-month period
as we can but certainly before the end of 12 months.
Complete that review, talk with the investment
community about the determination of that review, and
we would hope and expect having conducted that review
to have market conditions in place that would enable us
to close, divest or other wise deal with businesses or
portions of businesses that do not fit strategically.
Do we intend to have all of that completed, done, in
the bank by the end of 12 months? That would be a
wonderful goal to aspire to. But again, looking at the
world around us right now, this transaction is not
going to be dependent upon taking 50 cents on the
dollar for assets that might otherwise get a little bit
more of premium just so that we can reduce debt. We
will pick our timing depending on market conditions if
we have something that will be sold.
J. Tatar: And if I might, let me just get back to the first
question you asked Mark. We're pretty clear about where
we're going to be doing that analysis. We're going to
be looking at the envelope business, we're going to be
looking at the woodland's issue, and we're going to be
looking at paper machines within the paper system. Not
the paper segment but some of the paper machines within
it. We'll be looking at some of our container board
assets. So that's where those studies will be going on,
the four core segments are set. Paper, which includes
coated paper, specialty paper and carbonless paper, and
then packaging, consumer and office products and
specialty chemicals.
John Luke: And let me take it one step further here, on paper
machines we don't anticipate selling paper machines.
Paper machines that will be addressed will be just as
we've seen in Tyrone, taken out of commission. Chip?
Chip Dillon: [Inaudible passage - Question: About cultural
differences between the two companies.]
John Luke: Sure the question had to do with cultural differences,
principally in the - go to market and compensation
areas and we can touch on others if you wish. I think
we have really peeled back the layers here and it was
pretty evident to Jerry and me as we talked before even
contemplating bringing our people together and our
boards really to a decision point on whether we wanted
to do this. That the cultural issues were not so great
that we would get all tangled up in those and not be
able to do the things we've talked about today.
Mead sells directly to customers just as Westvaco does.
The difference is Mead also has a merchant network that
if I'm correct, Jerry, are 45 to 50 percent of your
production.
J. Tatar: About 50/50.
J. Luke: And frankly I think that we have gradually built upon
our traditional dedication to direct sales through
Evadale, which we acquired from Temple Inland to engage
in a little bit of altered go to market strategy using
merchants or a converters as well to get to small
consumers, small users, small printers, paper board
that we otherwise, couldn't efficiently reach. So
there's an opportunity here I think for us to redefine
the landscape and I don't view that as a cultural clash
at all.
Westvaco has, over the last five or six years, worked
very hard to your second question to alter the
compensation system so that we do have variable
compensation right down through the ranks and
particularly right on down to the lowest level in the
sales forces. The reason why you don't think we pay
bonuses is we've set the targets pretty dog gone high
because we wanted to alter and improve performance. So
we---but we are doing that and we have found in looking
at what Mead is doing that the schemes as it were that
the two companies would have---would be quite
compatible. I don't think there's anything that Mead is
doing that is at all out of character with what is good
practice and good practice that can be reconciled with
Westvaco.
J. Tatar: Yes, well I think one of the neat things is that
culturally, if it gets down to fundamental cultural
issues, we're very much---the two companies are very
much alike. Yes we have different processes for lots of
things but that's actually a plus too, because our job
on these integration teams is to pick the best one. And
it isn't in normal acquisition there's one process that
wins normally. In this case, we're going to pick the
best one, the one that gets the best value, the best
cost structure.
J. Luke: And that may not be an existing process. (Cross
talking) I think this is one thing that we are really,
again, using the power of this combination and the
imperative of the transition in this industry and
today's economic time to really ensure that we are
stepping up and finding what is best practice in
industry. Not just what is preferred or seems to be
better at either Westvaco or Mead. And I really think
that's why the chemistry is so good is that the groups
are being challenged to find the best. Yes, it's not a
matter of who's winning or who's losing it's really
what we're creating. And culturally in both companies
that's a leadership challenge for us to keep people
focused on all of that. But once you get people focused
on that bright star if it were out there that's where
they're going. And that's really what we want to have.
Jerry Tatar: Any last burning question? If not, I'll get Mark up
here to talk to you here about a little package of take
home things. One thing you'll find in there is the
latest copy of "Oprah". And I think it's kind of a neat
thing because historically this is a relatively new
magazine. Oprah herself selected the paper and she had
the wisdom to pick Westvaco cover stock and Mead as far
as the inner pages are concerned.
John Luke: Talk about micromanagment! [Laughter]
Jerry Tatar: We thank you very much, both John and I do, for you
taking your time to be here. This is an exciting time
for us and we want you to be comfortable with what
we're doing. But let me turn it over to Mark unless you
have something.
J. Luke: No, I would echo Jerry's vote of thanks to all of you
for your continuing interest in this particularly as we
move into the next phase and the next six-weeks or so
towards bringing this to completion. That will no doubt
prompt a whole series of additional questions and we
and our teams will be readily available for any
continuing questions you have. Thanks again. Mark?
M. Pomerleau: Before you go on the way out you'll find a set of the
entire slides, including those used today. So pick that
up on your way out. Also, Jerry and John mentioned
product display in the back of the room and we have
some product samples for you as parting gifts.
Additional Information
The Mead Corporation ("Mead") and Westvaco Corporation ("Westvaco") have
filed with the SEC a registration statement on Form S-4 on behalf of MW
Holding Corporation containing a preliminary joint proxy
statement/prospectus and other relevant documents concerning the proposed
transaction. INVESTORS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC
BECAUSE THEY CONTAIN IMPORTANT INFORMATION ON THE PROPOSED TRANSACTION.
Investors may obtain the documents free of charge at the SEC's website
(http://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). INVESTORS SHOULD READ THE
JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE MAKING ANY VOTING OR
INVESTMENT DECISION. 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 stockholders, 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 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.