I have a attached a copy of the data used to answer the question Prepare a 2007 classified balance sheet and multistep income statement. Use the account balances from the unadjusted trial balance and the additional Northco Company information. Do not record and entries, only prepare the financial statements. Additional Northco Company Info. The sales account included an 800,000 (net of tax) loss due to a flood destroy the facitlity in Rio. Historcally this has never happened before. The account gain/loss from sale of investments included the selling of a small division (a segment of Northco that makes the packaging envelopes) for 4 million. Prior to the sale the division had generated income of 1 million

Eastvaco, Inc. A Comprehensive Managerial Case - Supporting Files 1. Eastvaco, Inc., 10K Report 2. Charlotte Facility Balance Sheet 3. Charlotte Facility Income Statement 4. Packaging Manufacturing Process 5. Paper Cup Manufacturing Process 6. Envelope Manufacturing Process 7. Ratio Worksheet Ratio Calculations Page 1 Page 2 Page 3 Page 4 ng .n et Assignment Files pp or t@ ca ps to ne pu bl is hi 1. Initial Analysis of Eastvaco and the Charlotte Facility 2. Financial vs. Managerial Accounting 3. Balanced Scorecard 4. Cost-Volume-Profit 5. Manufacturing Alternative 5. Overhead Allocation 6. Activity Based Costing and Management (ABC) 7. Controlling Cost and Performance Managing 8. Target Costing 9. Breakroom Discussion 10. Costing, Budgeting and Internal Reporting 11. Variance Analysis 12. Organizational Structure 13. Company comparison and Evaluation 14. Global Expansison Edition Name Activity Based Costing and Management Sue, the corporate controller, has thus far been impressed with your performance at the Charlotte plant. She thinks it is time for the Company to move forward with a more precise costing system. She meets with you to discuss if you are able to implement Activity Based Costing at Charlotte. Being on the fast-track, you are eager to demonstrate that you should be the successor to Sue and agreed to pilot ABC at Charlotte. You have gathered the following interim data for envelopes and cups. et Cups $8,750,000 350,000 50,000 153,625 6,500 $16,800,000 g. n $5,017,500 Envelopes Direct costs $8,250,000 Units produced 1,500,000 Machine hours 200,000 Direct labor hours 34,500 Number of quality inspections 1,000 Revenue generated by the two products $15,000,000 hi n Total production overhead to ne pu bl is You have determined, using ABC, that overhead can be assigned to separate cost pools specifically: Pool 1 = $1,260,000 using machine hours as the cost driver Pool 2 = $2,257,500 using direct labor hours as the cost driver Pool 3 = $1,500,000 using the number of quality inspections as the cost driver ca t@ What are the steps in ABC implementation? Provide 3 possible non-value added activities that the Charlotte facility may be experiencing? Using the old plant-wide rate calculate gross profit and the rate of return on the two products. Using the new cost pools and cost drivers calculate gross profit and the rate of return of the two products. pp or 1. 2. 3. 4. su Required: ps Historically, Charlotte has used a single plant-wide rate, machine hours for the allocation of overhead. Name Company Comparison and Evaluation 1. 2. 3. Using the ratios provided in the file \"RatioCalculations\" calculate the ratios for Eastvaco. If you are unable to find sufficient data for any given area you must state so. Go to the following URL: http://moneycentral.msn.com/investor/sec/filing.asp?Symbol=MWV This will take you to the 10Ks for Meadwestvaco. Use the 10K ending 12/31/2007. Compare the results from requirement 1 and compare Eastvaco with Meadwestvaco. Which company would you consider to be the most financially viable and why? Compare the ratios you calculated for Eastvaco with industry averages and write a short memo discussing your evaluation. Your memo should be organized and well written. su pp or t@ ca ps to ne pu bl is hi n g. n et Note: Use the \"Ratio Worksheet\" to calculate the ratios. Name Controlling Cost and Performance Measures Eastvaco, due to its decreasing financial condition, is concerned with maintaining control over their costs. This is particularly a problem at the Charlotte plant. The plant manager has been under some pressure to improve performance measurement. The three products, envelopes, cups and packaging are made from recycled materials. Unfortunately, there is not always enough recycled material available and Charlotte has to purchase other material. Since all three products have similar manufacturing processes some aggregation of data is possible. There are three product managers responsible for envelopes, cups and packaging, respectively. The plant manager asks the three product managers to meet with him to discuss how best to measure performance and control costs. A heated discussion erupts about the effectiveness of financial vs. nonfinancial measures. What nonfinancial issues and measures should we consider and why? su pp or t@ ca ps to ne Your answers should be organized and well written. pu bl is 1. hi n g. n et The cup manager contends that numbers do not tell the whole story while the packaging manager states, \"numbers are objective\" and is the only way to determine how we are doing. The envelope manager takes a middle ground, \"we need both.\" After several hours the plant manager becomes impatience and states, \"how can we even begin to measure anything when my managers don't agree on how or what to measure.\" He asks for the following: Name Costing, Budgeting and Internal Reporting Congratulations! You have been hired by Eastvaco as Plant Controller for the Charlotte facility. Your resume includes both financial and managerial accounting experience. You have had extensive experience in accounting for several manufacturing companies. You accepted this current position since it represents a substantial increase in responsibilities and you are eager to impress Sue and Tom. Sue, the Company Controller, has given you an extensive project. Eastvaco has enjoyed greater than industry average revenue, net income and cash flow. The Charlotte facility, initially, had a near monopoly on \"green\" stationary. Green stationary is constructed from recycled materials and reforested trees. Unfortunately, that is no longer the case. Due to increased pressure from competition the current business model is no longer producing satisfactory results. Eastvaco operates in a decentralized manner with each facility being treated as an investment center. pu bl is hi n g. n et You are shocked to find that the previous plant controller did not actively participate in financial planning since the Company and, the Charlotte plant in particular, was doing so well it was thought that it was not needed. Sue explained that, due to the reduced revenue and profit margins, the Company was seeking a large bank loan specifically for the Charlotte facility. As part of the loan process the bank is requiring a budget. During your meeting with Sue you received a brief history of Eastvaco and the Charlotte Subsidiary. You listen intently has Sue gives you the following overview. t@ ca ps to ne Eastvaco Corporation, a Delaware Corporation incorporated in the early 1900s is one of the major producers of paper and paperboard in the United States. The company converts paper and paperboard into a variety of end products, manufactures a variety of specialty chemicals, produces lumber, sells timber from its timberlands and is engaged in land development. In Brazil, it is a major producer of paperboard and corrugated packaging for the markets of that country and also operates a folding carton plant. Eastvaco also has a folding carton plant in the Czech Republic. Eastvaco exports products from the United States, Brazil and the Czech Republic to other countries throughout the world. su pp or The Charlotte facility was created in the late 1980's whose mission was to produce high quality, environmental friendly, paper products. The Company believed, due to the substantial EPA violations and public opinion regarding the environment, that a cutting edge, low carbon footprint plant needed to be built. The Company uses the Charlotte facility as their premier plant and is used in much of their public relation campaigns. In the beginning the plant was enjoying a comfortable market share of green paper products. This was due to extensive advertising and relatively little competition in the use of green technology. The previous controller, Jim Person, had been with the Company for 28 years. While experienced and knowledgeable, he often relied on outdated methods of gathering information. He did not utilize all available information and reports (other than required financial reports) were not very extensive. In particular, internal reports and analyses were not considered a high priority. Sue continues explaining that \"those times are over.\" We need more and better internal reporting. The Charlotte plant is no longer enjoying the large market share it once experienced. Also, revenue, net income and cash flow have declined. \"This is unacceptable to the CEO and Board of Directors and must be addressed.\" The Board has authorized a large bank loan to upgrade facilities but due to the previous controller's attitude, we simply do not have the required reports that will likely be required by banks. Sue has provided you with a complete set of financial statements, complete with Charlotte specific financial information. She strongly suggests that you begin by reading the complete set of statements that Eastvaco included in their SEC 10K report. After an intensive analyses of available information you prepared al budget worksheet. The following information is provided: fixed cost for 2007 totaled $6.5 Million, variable cost for envelopes is $15.3 Million, cups is $9.3 Million and packaging is $3.3 Million. Sue provided the following information. The envelopes and cups consist of various colors and sizes. You have not attempted to prepare any budgets by individual product lines. g. n et Fixed overhead consist of two categories of costs, depreciation and miscellaneous (taxes, supervisor salaries, etc.) Each category is allocated to individual product lines in proportion to estimated sales value of the goods produced in each year. hi n pu bl is year. The association between variable manufacturing costs and sales is based on actual activity in the latest It is estimated that general and administrative expenses will remain constant. ps to ne The previous expenditure (10% of the prior year year's total sales) for marketing will also remain constant. ca The anticipated bank loan will carry a 7% interest rate. 1. 2. 3. su REQUIREMENTS: pp or t@ After reviewing the above analyses and schedule Sue has some additional task and questions. You are to respond to the following inquiries. Sue ask for you to prepare a well organized and formatted schedule showing what the variable manufacturing cost is, as a percentage of total sales, for each of the three product lines for 2007. Sales were Envelopes = $18M, Cups = $11.6M and Packaging = $6.6M Total Sales = $36.2 M Calculate the 2007 weighted average contribution margin. Calculate breakeven in dollars for 2007. (Hint: You will need the information from previous requirements.) Additional Information: The home office rejected your proposed budget. This is based on their belief that the loan would not be granted based on your budget. The Plant Manager offers an alternate plan. He wants to increase the advertising budget to $3.8 million (was$3.6M). This he thinks will cause an increase in sales. This would create enough profit to have the loan approved. Assume that the advertising cost is treated as a fixed cost. et g. n hi n pu bl is to ne ps ca t@ pp or 5. Given the comments above, how much would the company's profit increase? (Hint, use the weighted average contribution margin you calculated in requirement #3. Calculate increase in revenue after additional variable costs then subtract additional fixed cost) What other ways could you allocate fixed manufacturing costs? su 4. Name Discussion Overheard in the Breakroom Bob Manson, the plant manager for the company's Charlotte, NC facility, was attending a weeklong meeting with other plant managers at the corporate headquarters. Bob is unhappy because he feels he has been left out of the information loop. John and Jason, two other plant managers, agree with Bob that needed information has been withheld. Bob, states \"Every since Jane Goodman became head of information services she has been trying to make a name for herself by reducing the level of information passed on to us. \" \"I realize she is attempting to save the company money but at our expense. We need that information to run our business.\" John and Jason both agreed. hi n g. n et Bob tells John and Jason that he has an idea and wants their opinion. Bob says, \"I know someone in Jane's department that will run any report I ask for. I may have to give him a little something for his efforts but it's worth it. If we can't get what we need by going through channels then we will get it however we can.\" John replies, \"why not, it isn't like we are using it for our purposes. We need the information to keep on top of things.\" Jason isn't so sure. He asks, \"Is this the right thing to do?\" Bob rebuts with, \"we can do a better job and the company benefits, so what is wrong?\" pu bl is Requirement: su pp or t@ ca ps to ne Write a short narrative discussing Jason's last statement. Your answer should be organized and well written. UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED OCTOBER 31, 2007 EastvacoCorporation (Exact name of registrant as specified in its charter) Item 1. Business Part I to ne pu bl is hi n g. n et General Eastvaco Corporation, a Delaware Corporation incorporated in 1899 as West Virginia Pulp and Paper Company, is one of the major producers of paper and paperboard in the United States. The company converts paper and paperboard into a variety of end products, manufactures a variety of specialty chemicals, produces lumber, sells timber from its timberlands and is engaged in land development. In Brazil, it is a major producer of paperboard and corrugated packaging for the markets of that country and also operates a folding carton plant. Eastvaco also has a folding carton plant in the Czech Republic. Eastvaco exports products from the United States, Brazil and the Czech Republic to other countries throughout the world. The term "Eastvaco" or "the company" includes Eastvaco Corporation and its consolidated subsidiaries unless otherwise noted. pp or t@ ca ps Business segments The company's operating divisions have been classified into reportable segments based upon the nature of their products and services within three major product categories, with separate disclosure of our Brazilian packaging operation, Rigesa, Ltda. Financial information about the company's business segments is contained in Note O to the consolidated financial statements, included in the 2007 Eastvaco Annual Report and is incorporated herein by reference. su Marketing and distribution The principal markets for Eastvaco's products are in the United States. Sales to customers outside the United States made up approximately 24% of Eastvaco's total sales in 2007 (2006 and 200525%). Substantially all products are sold through the company's own sales force. Eastvaco maintains 30 sales offices located throughout the United States and 30 in foreign countries (Europe and South America). Forest resources The principal raw material used in the manufacture of paper, paperboard and pulp is wood. Eastvaco owns 1,446,000 acres of forest land in the United States and southern Brazil (more than 1,000 miles from the Amazon rainforests). Eastvaco's Cooperative Forest Management Program provides an additional source of wood fiber from the 1,370,000 acres owned by participating landowners and managed with assistance from Eastvaco foresters. Eastvaco's strategy, based on the location of its mills and the composition of surrounding forest land ownership, is to provide a portion of its wood fiber from company-owned land and to rely on private woodland owners and residues from independent solid wood products plants for substantial quantities of wood. During 2007, Eastvaco furnished 39% (2006-36%, 2005-39%) of its wood requirements from company-owned land, and an additional 8% (2006-7%, 2005-8%) was purchased from landowners in the Cooperative Forest Management Program. The remainder was purchased from other private landowners and sawmills by mill wood procurement organizations. The wood procurement system includes 27 pulpwood concentration and processing yards that are strategically located to store and ship wood to the mills as needed. The Cooperative Forest Management Program, private landowners and sawmills continue to provide adequate volumes of timber to meet our external fiber needs. The company has no reason to expect that these sources will be unable to furnish adequate wood supply in the future. Eastvaco supplied 100% of the wood for its Brazilian mill from company plantations. hi n g. n et Eastvaco forests include plantations, natural stands and fiber farms. The inventory of growing trees, the basis for volume production, has increased steadily over the last decade in spite of a steady rise in the volume of wood harvested. Most of the pine stands harvested are plantations that are regenerated by establishing new pine plantations. Most hardwood stands that are harvested are re-established by planned natural regeneration from seeds and sprouts. Eastvaco's hardwood plantation and fiber farm programs are expanding and involve several domestic species. The quantity of wood harvested by Eastvaco from its lands in any year is primarily controlled by long-range forest management programs based on integrated wood supply plans. pu bl is Eastvaco forest are being depleted rapidly without a foreseeable source for future production. World pressure is being focused on the Brazilian rain forest threatening the harvest of timber. pp or t@ ca ps to ne The Charlotte plant has focused on recycled materials for the production of envelopes, paper cups and packaging material. The Company has put considerable resources in making the Charlotte facility a \"green\" production facility. In addition to recycling the plant has significantly reduced its carbon footprint and the flagship of Eastvaco's operations. Recently there has been an alarming shortage of recycled wood products. The Company is committed to continue infusing the Charlotte plant with the necessary resources to maintain its status as the leading \"green paper production\" plant in the United States. See Charlotte specific financial statements. su Patents Eastvaco has obtained a number of foreign and domestic patents as a result of its research and product development efforts. Eastvaco is the owner of many registered trademarks for its products. Although in the aggregate, its patents and trademarks are of material importance to Eastvaco's business, the loss of any one or any related group of such intellectual property rights would not have a material adverse effect on the business of the company. Competition Eastvaco competes in very competitive domestic and foreign markets. Eastvaco's strategy is to develop distinctive and innovative products and services for its customers in the United States and world markets. There are many large, well established and highly competitive sellers competing in these markets as well. The company competes principally through quality, value-added products and services, customer service, innovation, technology, product design and price. The company's business is affected by a range of macroeconomic conditions, such as industry capacity, economic growth in the U.S. and abroad, and currency exchange rates. Research Eastvaco operates major research facilities at Laurel, MD, North Charleston, SC, and Covington, VA, which provide process and product support for our manufacturing operations as well as a forest science laboratory at Summerville, SC. Forest research conducted there, and at satellite centers at Wickliffe, KY, Rupert, WV, and Tres Barras, State of Santa Catarina, Brazil, is focused on biotechnology, genetics, tree nutrition, regeneration, stand management, environmental protection and forest measurements. The goal is increased timber and fiber production on a sustainable basis. The company's larger divisions and subsidiaries also have product development staffs which work on product-related projects directed toward specific opportunities of the individual units. In 2007, the company incurred $47.3 million (2006-$45.1 million, 2005-$42.9 million) of research and development costs. Substantially all of the research projects are company sponsored. Approximately 245 scientists were employed in research and development activities. pp or t@ ca ps to ne pu bl is hi n g. n et Environmental protection Eastvaco is subject to federal and state environmental laws and regulations in all jurisdictions in which it has operating facilities. Compliance with these requirements involves the diversion of capital from production facilities and increases operating costs. In the opinion of Eastvaco's management, environmental protection requirements are not likely to adversely affect the company's competitive industry position since other domestic companies are subject to similar requirements. In 2003, the company authorized removal of elemental chlorine from all of its pulp bleaching processes. This important initiative, completed during 2005 at a cost of approximately $110 million, represented a major step by Eastvaco in addressing subsequent EPA regulations for the U.S. pulp and paper industry regarding air and water quality. These regulations, known as the Cluster Rule, were published in the Federal Register in April 2006. The company anticipates additional capital costs to comply with other parts of these new regulations over the next several years to be in the range of $100 million to $150 million, which will also increase operating costs in the range of $3 million to $7 million annually. Environmental organizations are challenging the EPA regarding certain aspects of the Cluster Rule in the U. S. Court of Appeals. Eastvaco and other companies are participating in that litigation. If the legal challenge by environmental organizations to the regulations is successful, the company could face additional compliance costs of up to $150 million over the next several years. See Part I, Item 3, "Legal proceedings," "Other matters." su Employees At October 31, 2007, Eastvaco employed approximately 12,750 persons, of whom 5,980 domestic employees are represented by various labor unions under collective bargaining agreements. Approximately 1,990 employees of Rigesa, Ltda. ("Rigesa"), Eastvaco's Brazilian subsidiary, are represented under collective bargaining arrangements. Eastvaco believes its labor relations are good. International operations In Brazil, Rigesa operates a paperboard mill, a corrugated box plant and a consumer packaging plant in Valinhos, State of Sao Paulo; a paperboard mill in Tres Barras, State of Santa Catarina; and corrugated box plants in Blumenau, State of Santa Catarina; Manaus, State of Amazonia; and Pacajus, State of Ceara. Rigesa is one of the few paper companies in Brazil which is integrated from the forests to the markets. This fact, combined with technology drawn from Eastvaco's U.S. experience, has provided Rigesa with a history of high-quality products and strong growth. Rigesa accounted for approximately 13% of packaging segment operating profit in 2007. The international economic crisis has adversely impacted economic growth in Brazil and negatively impacted the operating results of Rigesa. Eastvaco's Czech Republic subsidiary, Eastvaco Svitavy, spol. s r.o. ("Svitavy"), operates a consumer packaging plant in that country. Svitavy supplies consumer packaging to the markets of Eastern, Central and Western Europe. The packaging is made primarily from distinctive paper and paperboard produced by Eastvaco in the United States. Export sales from Eastvaco's U.S. operations made up approximately 18% of Eastvaco's 2007 sales (2006-17%, 2005-16%). Sales of our foreign operating subsidiaries, including exports, were 6% of Eastvaco's total sales (2006-8%, 2005-9%). While there are risks inherent in foreign investments, Eastvaco does not believe at this time that such risks are material to its overall business prospects. et Properties The location of Eastvaco's production facilities and their principal products in each business segment as of October 31, 2007, were as follows: Paper Location Charlotte, NC Columbia, SC Luke, Maryland pp or Product Bleached paperboard su Packaging Location Covington, Virginia North Charleston, South Carolina t@ ca ps to ne pu bl is hi n g. n Product Envelopes, paper cups and packaging Pulp White printing and converting papers Wickliffe, Kentucky White printing and converting papers, and market pulp Tyrone, Pennsylvania White printing and converting papers Atlanta, Georgia Envelopes Dallas, Texas Envelopes Enfield, Connecticut Envelopes Indianapolis, Indiana Envelopes Kenosha, Wisconsin Envelopes Los Angeles, California Envelopes Springfield, Massachusetts Envelopes West Boylston, Massachusetts Envelopes Williamsburg, Pennsylvania Envelopes Springfield, Massachusetts Flexible packaging and paper cups Low Moor, Virginia Cleveland, Tennessee Newark, Delaware Richmond, Virginia Svitavy, Czech Republic Valinhos, Sao Paulo, Brazil Folding cartons Richmond, Virginia Tres Barras, Santa Catarina, Brazil Valinhos, Sao Paulo, Brazil Blumenau, Santa Catarina, Brazil Manaus, Amazonia, Brazil Pacajus, Ceara, Brazil Valinhos, Sao Paulo, Brazil Summerville, South Carolina Chemicals Saturating kraft, containerboard and folding carton stock Extrusion coated bleached paperboard Folding cartons Folding cartons Folding cartons Folding cartons Cartons for liquid products Containerboard and kraft papers Corrugatingmedium (principally from recycled papers) Corrugated boxes Corrugated boxes Corrugated boxes Corrugated boxes Building products Location Covington, Virginia Wickliffe, Kentucky DeRidder, Louisiana Product Activated carbon products and services Activated carbon products and services Printing ink resins and tall oil derivatives North Charleston, South Carolina Lignin based surfactants and tall oil - Capacity and production Capacity estimates are based on the expected operations and product mix of each of the locations. Whether these estimates can in practice be attained or exceeded is dependent upon a variety of factors such as actual product mix, quantity and timing of production runs, required maintenance time and labor conditions. ng . ne t The approximate annual productive capacity is 3,143,000 tons for the paper and paperboard mills (including the Charlotte facility) and 761,000 tons for the converting plants. The 2007 production from these facilities was 2,992,000 and 538,000 tons, respectively. The mills supplied 70% of the paper and paperboard needs of the converting plants. The annual productive capacity for the chemical plants is 459,000 tons. In 2007, 363,000 tons of specialty chemicals were produced. pu bl is hi Leases See Note I to the consolidated financial statements, incorporated by reference in Part II of this report, for financial data on leases. Substantially all of the leases of production facilities contain options to purchase or renew for future periods. or t@ ca ps to ne Other information Certain Eastvaco facilities are owned, in whole or in part, by municipal or other public authorities pursuant to standard industrial revenue bond financing arrangements and are accounted for as property owned by Eastvaco. Eastvaco holds options under which it may purchase each of these facilities from such authorities by paying a nominal purchase price and assuming the indebtedness owing on the industrial revenue bonds at the time of the purchase. The sale is contingent upon maintaining a "green" manufacturing process. su pp The company owns in fee all of the mills, plants and timberlands listed in Item 2, except leased facilities and those described above. Eastvaco's mills, plants and related machinery and equipment are considered by the company to be well maintained and in good operating condition. Item 3. Legal proceedings In 2003, the company authorized removal of elemental chlorine from all of its pulp bleaching processes. This important initiative, completed during 2005 at a cost of approximately $110 million, represented a major step by Eastvaco in addressing subsequent EPA regulations for the U.S. pulp and paper industry regarding air and water quality. These regulations, known as the Cluster Rule, were published in the Federal Register in April 2006. The company anticipates additional capital costs to comply with other parts of these new regulations over the next several years to be in the range of $100 million to $150 million which will also increase operating costs in the range of $3 million to $7 million annually. Environmental organizations are challenging the EPA regarding certain aspects of the Cluster Rule in the U.S. Court of Appeals. Eastvaco and other companies are participating in that litigation. If the legal challenge by environmental organizations to the regulations is successful, the company could face additional compliance costs of up to $150 million over the next several years. The company is currently named as a potentially responsible party with respect to the cleanup of a number of hazardous waste sites under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and similar state laws. While joint and several liability is authorized under CERCLA, as a practical matter, remediation costs will be allocated among the waste generators and others involved. The company has accrued approximately $5 million for estimated potential cleanup costs based upon its close monitoring of ongoing activities and its past experience with these matters. In addition, the company is involved in the remediation of certain other than CERCLA sites and has accrued approximately $10 million for remediation of these sites. to ne pu bl is hi n g. n et Other matters In April 2007, EPA, Region III, issued Notices of Violation (NOVs) to seven paper industry facilities, including the company's Luke, MD, mill, alleging violation of EPA's Prevention of Significant Deterioration (PSD) regulations requiring special permitting and emissions evaluation prior to industrial expansion. The NOV received by the company primarily targets three capital projects at the mill, one in 1982 and two in 1997. The NOV alleges that the company did not obtain PSD permits or install required pollution controls, and it sets forth EPA's authority to seek $27,500 per day for each violation. The company has presented substantial data demonstrating that PSD requirements did not apply to the targeted projects and that new emission controls proposed by EPA are not required by the governing regulations. Unless the matter is resolved, an enforcement action may be brought against the company. ca ps Executive officers of the registrant The following table sets forth certain information concerning the relevant officers of Eastvaco Corporation: su pp or t@ Name Present position Jerry Petersen President and ChiefExecutive Officer Terry Thompson Treasure and CFO Sue Carroll Company Controller Paul Manson Charlotte Plant Manager Item 8. Financial statements and supplementary data Information required by this item is included as part of the 2007 Eastvaco Annual Report under the captions "Consolidated statement of income," "Consolidated balance sheet," "Consolidated statement of shareholders' equity," "Consolidated statement of cash flows," "Notes to financial statements" and "Report of independent accountants," and is incorporated herein by reference. Management's discussion and analysis of financial condition and results of operations Financial statements CONSOLIDATED STATEMENT OF INCOME In thousands, except per share 2007 $2,801,849 29,384 2,831,233 Sales Other income [expense] Cost of products sold [excludes Depreciation shown separately below] Selling, research and administrative expenses Depreciation and amortization Restructuring charge Interest expense Year ended October 31 2006 2005 $2,885,917 $2,982,288 18,747 28,743 2,904,664 3,011,031 1,969,515 2,071,011 2,161,194 230,963 280,470 78,771 123,538 2,683,257 238,097 280,981 110,162 2,700,251 240,814 269,151 93,272 2,764,431 147,976 204,413 246,600 36,800 72,400 83,900 111,176 $132,013 Net income $ Net income per share: Basic Diluted 100,236 100,495 101,311 101,788 $1.60 1.58 pu bl is 101,978 102,704 to ne Shares used to compute net income per share: Basic Diluted $1.30 1.30 162,700 hi n $1.11 1.11 $ et Income taxes g. n Income before taxes The accompanying notes are an integral part of these financial statements. ca t@ pp or CONSOLIDATED BALANCE SHEET In thousands ps Eastvaco Corporation and consolidated subsidiary companies 2007 $105,050 286,423 285,783 61,936 739,192 su Assets Cash and marketable securities $ 108,792 Receivables 318,369 Inventories 248,963 Prepaid expenses and other current assets 61,884 Current assets 738,008 Plant and timberlands: Machinery 5,094,773 Buildings 672,744 Other property, including plant land 226,977 5,994,494 Less: accumulated depreciation 2,779,199 3,215,295 Timberlands-net 266,386 Construction in progress 99,702 3,581,383 Other assets 577,301 $4,896,692 At October 31 2006 Liabilities and shareholders' equity Accounts payable and accrued expenses $ 361,959 Notes payable and current maturities of long-term obligations 50,200 Income taxes 12,955 5,079,177 655,020 224,229 5,958,426 2,634,702 3,323,724 273,975 204,732 3,802,431 467,045 $5,008,668 $ 346,552 99,072 21,501 Current liabilities 425,114 Long-term obligations 1,502,177 Deferred income taxes 798,113 Shareholders' equity: Common stock, $5 par, at stated value Shares authorized: 300,000,000 Shares issued: 103,170,667 [2006103,170,667] 765,810 Retained income 1,607,504 Accumulated other comprehensive income [loss] [129,981] Common stock in treasury, at cost Shares held: 2,877,824 [20062,844,300] [72,045] 2,171,288 $4,896,692 467,125 1,526,343 768,752 764,574 1,588,932 [32,167] [74,891] 2,246,448 $5,008,668 g. n et The accompanying notes are an integral part of these financial statements. to ne shareholders' Accumulated other Common Outstanding Common stock in Retained comprehensive shares stock treasury income income/(loss) equity 101,891 Balance at October 31, 2005 2,278,568 Comprehensive income Net income 132,013 Foreign currency translation [32,167] Comprehensive income 99,846 Cash dividends [89,300] Repurchases of common stock [50,176] Issuance 7,510 101,930 $1,479,025 - t@ $[19,745] - - - 162,700 - - - - [89,778] - [610] - pp or su $750,457 ca Balance at October 31, 2004 $2,209,737 Net income 162,700 Cash dividends [89,778] Repurchases of common stock [20,880] Issuance 16,789 ps Total pu bl is CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY In thousands hi n Eastvaco Corporation and consolidated subsidiary companies 649 11,065 761,522 [20,880] 8,315 [32,310] - - [2,591] - 1,549,356 - - - 132,013 - - - - - - - - [1,822] 218 3,052 [50,176] 7,595 [89,300] [3,137] $ [32,167] - Balance at October 31, 2006 2,246,448 Comprehensive income Net income 111,176 Foreign currency translation [97,814] Comprehensive income 13,362 Cash dividends [88,191] Repurchases of common stock [11,961] Issuance 11,630 100,326 764,574 [74,891] 1,588,932 - - - 111,176 - - - - - - - [499] - 466 [88,191] [11,961] 1,236 - 14,807 [4,413] 2006 pu bl is 2007 $ 132,013 to ne $111,176 $ 162,700 280,981 57,244 - 269,151 46,798 - [78,658] [50,869] [39,296] ca t@ pp or su Cash flows from investing activities: Additions to plant and timberlands Proceeds from sales of plant and timberlands Other investments Other, net Net cash used in investing activities 2005 280,470 32,286 80,500 ps Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Provision for depreciation and amortization Provision for deferred income taxes Restructuring charge Pension credit and other employee benefits [Gains] losses on sales of plant and timberlands Foreign currency transaction [gains] losses Net changes in assets and liabilities Other, net Net cash provided by operating activities g. n CONSOLIDATED STATEMENT OF CASH FLOWS In thousands Year ended October 31 hi n Eastvaco Corporation and consolidated subsidiary companies et Balance at October 31, 2007 100,293 $765,810 $[72,045] $1,607,504 $2,171,288 The accompanying notes are an integral part of these financial statements. [17,891] 3,601 [2,577] 3,806 894 2,506 [10,537] 4,316 [17,063] 1,000 [43,380] 931 412,713 406,706 390,683 [228,879] [422,984] [621,172] 22,781 [22,659] [1,135] 6,905 50 [229,892] Cash flows from financing activities: Proceeds from issuance of common stock 9,122 Proceeds from issuance of debt 881,518 Dividends paid [88,191] Treasury stock purchases [10,792] Repayment of notes payable and long-term obligations [952,230] Net cash [used in] provided by financing activities [160,573] [416,029] 22,292 5,912 [592,968] 3,766 548,194 [89,300] [49,484] 10,901 649,186 [89,778] [17,374] [470,146] [290,018] [56,970] 262,917 [32,167] [97,814] $[129,981 Effect of exchange rate changes on cash Increase [decrease] in cash and marketable securities Cash and marketable securities: At beginning of period At end of period [18,506] [4,011] 3,742 105,050 $108,792 [646] [70,304] 175,354 $ 105,050 59,986 115,368 $ 175,354 The accompanying notes are an integral part of these financial statements. g. n et Eastvaco Corporation and consolidated subsidiary companies hi n Summary of significant accounting policies pp or t@ ca ps to ne pu bl is Basis of consolidation and preparation of financial statements: The consolidated financial statements include the accounts of all subsidiaries more than 50% owned. Investments in 20%- to 50%-owned companies are accounted for using the equity method. Accordingly, the company's share of the earnings of these companies is included in consolidated net income. In accordance with generally accepted accounting principles, the preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of some assets and liabilities and, in some instances, the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Certain prior years' amounts have been reclassified to conform with the current year's presentation. su Accounting standards changes: Effective November 1, 2006, the company adopted Statement of Financial Accounting Standards (SFAS) No.130, Reporting Comprehensive Income, which establishes standards for the reporting and displaying of comprehensive income. During the fourth quarter of fiscal 2007, the company adopted, SFAS No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits which standardizes the disclosure requirements for pensions and other postretirement benefits. These two standards do not affect financial statement presentation and disclosure but do not have a material impact on the company's consolidated financial position or results of operations. The 2006 and 2005 comparative financial information has been restated to conform with the 2007 presentation. In June 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities which requires derivative instruments to be recorded in the balance sheet at their fair value, with changes in their fair value being recognized in earnings unless specific hedge accounting criteria are met. SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities Deferral of the Effective Date of SFAS No. 133, delayed the effective date of SFAS No. 133 to the company's 2001 fiscal year. Given the current level of its derivative and hedging activities, the company believes the impact of this new standard will not be material. ps to ne g. n hi n pu bl is The company is currently named as a potentially responsible party with respect to the cleanup of a number of hazardous waste sites under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and similar state laws. While joint and several liability is authorized under CERCLA, as a practical matter, remediation costs will be allocated among the waste generators and others involved. The company has accrued approximately $5 million for estimated potential cleanup costs based upon its close monitoring of ongoing activities and its past experience with these matters. In addition, the company is involved in the remediation of certain other than CERCLA sites for which the company has accrued approximately $10 million for remediation and closure costs. et Environmental matters: Environmental expenditures that increase useful lives are capitalized, while other environmental expenditures are expensed. Liabilities are recorded when remedial efforts are probable and the costs can be reasonably estimated. The estimated closure costs for existing landfills based on current environmental requirements and technologies are accrued over the expected useful lives of the landfills. su pp or t@ ca Translation of foreign currencies: Due to the decline in the rate of inflation in Brazil in recent years, effective November 1, 2005, the Brazilian real became the functional currency for the company's Brazilian operations. The assets and liabilities of the company's Brazilian subsidiary are translated into U.S. dollars using periodend exchange rates and adjustments resulting from financial statement translations are included inin the "Accumulated other comprehensive income (loss)" in the balance sheet. Revenues and expenses are translated at average rates prevailing during the period. Prior to November 1, 2005, the functional currency for these operations was the U.S. dollar due to the high inflation rate which previously existed in that country. Foreign currency asset and liability accounts were remeasured into U.S. dollars at fiscal year-end rates except for inventories, properties and accumulated depreciation, which were translated at historical rates; revenues and expenses (other than those relating to assets translated at historical rates) were translated at average rates prevailing during the year. Translation gains and losses were included in "Other income (expense)." Marketable securities: For financial statement purposes, highly liquid securities purchased three months or less from maturity are considered to be cash equivalents. ps to ne hi n pu bl is Depreciation and amortization: The cost of plant and equipment is depreciated, generally by the straight-line method, over the estimated useful lives of the respective assets, which range from 20 to 40 years for buildings and 5 to 30 years for machinery and equipment. The cost of standing timber is amortized as timber is cut, at rates determined annually based on the relationship of unamortized timber costs to the estimated volume of recoverable timber. The company periodically evaluates whether current events or circumstances warrant adjustments to the carrying value or estimated useful lives of its long-lived assets. g. n Plant and timberlands: Owned assets are recorded at cost. Also included in the cost of these assets is interest on funds borrowed during the construction period. When assets are sold, retired or disposed of, their cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in "Other income (expense)." Costs of renewals and betterments of properties are capitalized; costs of maintenance and repairs are charged to income. Costs of reforestation of timberlands are capitalized. pp or t@ ca Other assets: Included in other assets are goodwill and other intangibles, which are amortized using the straight-line method over their estimated useful lives of 10 years. The company periodically reviews goodwill balances for impairment based on the expected future cash flows of the related businesses acquired. su Revenue recognition: The company recognizes revenues at the point of passage of title, which is at the time of shipment. Notes to financial statements A. Provision for restructuring During the fourth quarter of 2007, following completion of its strategic review process, the company adopted a plan to improve the its performance company's performance, principally to enhance the strength and focus of its packagingrelated businesses. Additionally, the company reviewed certain long-lived assets in its business for impairment. As a result of the above initiatives, a pretax charge of $80,500,000 was recorded in the fourth quarter of 2007. This charge is primarily due to the writedown of impaired long-lived assets, involuntary employee termination and other exit costs. Production facilities were written down to et Inventories: Inventories are valued at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for raw materials, finished goods and certain production materials. Cost of all other inventories is determined by the first-in, first-out (FIFO) or average cost method. their fair value using an assets-held-for-use model. An impairment of $67,430,000 was recorded as undiscounted cash flows were less than the carrying value of the assets prior to the impairment. Further, the company wrote off a paper machine and certain equipment with a total carrying value of $8,593,000 and abandoned the assets. In addition to the asset impairments described above, the company also recognized inventory write downs of $1,729,000 which have been included within the cost of products sold, employee termination costs of $1,508,000 and other exit costs of $1,240,000. B. Other income (expense) Components of other income (expense) are as follows: 2006 $ [894] 18,010 $17,891 15,115 $10,537 15,089 [2,506] 4,137 $18,747 [4,316] 7,433 $28,743 hi n [3,601] [21] $29,384 2005 et 2007 g. n In thousands Gains [losses] on sales of plant, equipment and timberlands Interest income Foreign currency transaction gains [losses] Other, net t@ ca ps to ne D. Current assets Marketable securities of $39,349,000 (2006$12,032,000) are valued at cost, which approximates market value. Receivables include $12,438,000 from sources other than trade (2006-$5,731,000), and have been reduced by allowances for discounts and doubtful accounts of $12,828,000 (2006$12,748,000). Inventories at October 31 are composed of: pu bl is C. Research and development Expenditures of $47,321,000 (2006-$45,139,000, 2005-$42,944,000) were expensed as incurred. su pp or In thousands Raw materials Production materials, stores and supplies Finished and in process goods 2007 $ 45,453 66,191 137,319 $248,963 2006 $ 55,580 74,338 155,865 $285,783 If inventories had been valued at current cost, they would have been $368,105,000 in 2007 (2006-$409,043,000). E. Interest capitalization In 2007, $132,428,000 of interest cost was incurred (2006-$130,914,000, 2005-$119,234,000) of which $8,890,000 was capitalized (2006-$20,752,000, 2005$25,962,000). F. Accounts payable and accrued expenses Accounts payable and accrued expenses at October 31: In thousands Accounts payable: Trade Other Accrued expenses: Taxes, other than income Interest Payroll and employee benefit costs 2007 2006 $118,413 18,812 $117,306 24,258 18,989 32,927 85,179 17,239 32,996 83,652 Other 87,639 $361,959 71,101 $346,552 G. Cash flows Changes in assets and liabilities are as follows: In thousands [Increase] decrease in: Receivables Inventories Prepaid expenses and other current assets Increase [decrease] in: Accounts payable and accrued expenses Income taxes payable 2007 2006 $[41,054] 24,545 2005 $ 12,765 [17,249] $[23,674] [7,577] [1,148] [5,905] 24,766 [9,686] $[2,577] 1,633 [5,597] [1,077] $[17,063] [9,957] [3,805] $[43,380] Reconciliation of capital expenditures on a cash basis: 2007 2006 Cash additions to plant and timberlands $228,879 $419,705 [4] 3,283 7,297 hi n [3,255] $613,896 [21] et $232,292 [158] 2005 g. n In thousands New investment in plant and timberlands Less: debt assumed net change in related current liabilities $422,984 $621,172 to ne pu bl is Cash payments for interest, excluding amounts capitalized, were $112,066,000 in 2007 (2006-$108,082,000, 2005-$84,503,000). Cash payments for income taxes were $12,108,000 in 2007 (2006-$13,744,000, 2005-$39,331,000). pp or t@ ca ps H. Leasing activities and other commitments The company leases a variety of assets for use in its operations. Leases for administrative offices, converting plants and storage facilities generally contain options which allow the company to extend lease terms for periods up to 25 years, or to purchase the properties. Certain leases provide for escalation of the lease payments as maintenance costs and taxes increase. su The company has no significant capital lease Liabilities. At October 31, 2007, commitments required to complete currently authorized capital projects are $147 million. I. Notes payable and long-term obligations Notes payable and long-term obligations at October 31, 2007: In thousands Debentures: 9.65%, due 2002 9 3/4%, due 2020 Sinking Fund Debentures: 7%, due 2004-2023 7 1/2%, due 2008-2027 7.65%, due 2008-2027 7.75%, due 2004-2023 8 1/8%, due 2000-2007 8.30%, due 2003-2022 10 1/8%, due 2000-2019 10 1/4%, due 2000-2018 10.30%, due 2000-2019 Pollution Control Revenue Bonds: Current Noncurrent $ $ 2,350 5,000 5,000 5,000 100,000 100,000 150,000 150,000 150,000 150,000 17,100 125,000 95,000 80,000 95,000 5.85-6.65%, due 2004-2018 5 7/8-5.9%, due 2000-2003 5 7/8-6.2%, due 2000-2007 5.9-6.2%, due 2004-2008 6 3/8%, due 2026 7 1/8-7 1/2%, due 2000-2001 8 1/4%, due 2000-2010 9 1/8-9.6%, due 2006-2015 10 1/2%, due 2004 Industrial Revenue Bonds: 7-7.67%, due 2000-2027 Economic Development Bonds: 8 3/4%, due 2000-2010 Notes payable and other 26,620 6,740 11,480 5,900 5,740 2,000 3,995 10,100 1,500 1,865 550 1,500 105 385 94,530 110 28,335 $50,200 4,190 117,282 $1,502,177 g. n pu bl is hi n The company has a revolving credit agreement for $500 million which expires December 31, 2000. Borrowings under the agreement may be in unsecured domestic or Eurodollar notes and may be at rates approximating prime or the London Interbank Offered Rate, at the company's option. There is a nominal commitment fee on the unused funds. These facilities are used to support commercial paper borrowings. There were no borrowings under this facility during 2007 and none in 2006. Recently the banks have expressed concern over meeting the terms agreed to in the debenture terms. et Outstanding noncurrent obligations maturing in the four years after 2000 are (in millions); 2001-$37.1; 2002-$133.3; 2003-$36.1; 2004-$56.6. pp or t@ ca ps to ne At October 31, 2007, the book value of financial instruments included in notes payable and long-term obligations was $1,477,162,000 (2006-$1,557,477,000), and the fair value was estimated to be $1,495,290,000 (2006-$1,636,093,000). The company has estimated the fair value of financial instruments based upon quoted market prices for the same or similar issues or on the current interest rates available to the company for debt of similar terms and maturities. su J Shareholders' equity During 2007, the company repurchased 460,000 shares (2006-1,800,000, 2005-500,000) of company stock under a repurchase program authorized in 2005 by the Board of Directors. The program was initiated to satisfy issuances under the company's stock option plans. There were no purchases in 2005, 2006 or 2007 under the stock repurchase program authorized in 1995 by the Board of Directors. At October 31, 2007, there were 44,170 of nonvoting $100 par value cumulative stock authorized and 10 million shares stock without par value authorized and issue. shares preferred of preferred available for K. Legal and environmental matters The company is involved in various legal proceedings and environmental actions, generally arising in the normal course of its business. Although the ultimate outcome of such matters cannot be predicted with certainty, the company does not believe that the outcome of any proceeding, lawsuit or claim that is pending or threatened, or all of them combined, will have a material adverse effect on its consolidated financial position, liquidity or long-term results of operations. In any given quarter or quarters, however, it is possible such proceedings or matters could have a material effect on results of operations. L. Business segment information In 2005, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." We adopted this statement Information, which the company adopted at October 31, 2007. Adoption of the standard had no impact on our net income. Previously reported segment information has been restated to conform to the new standard. g. n et Eastvaco is a leading manufacturer of paper, packaging and chemicals serving both U.S. and international markets. The company's operating divisions have been classified into reportable segments based upon the nature of their products and services within these three major product categories, with separate disclosure of Rigesa, Ltda., our wholly owned Brazilian packaging subsidiary. Following is a description of our reportable business segments: pu bl is hi n The paper segment is engaged in the manufacturing and Selling marketing of printing grade papers and envelopes. All of this segment's operations are in the United States. It operates three mills in the eastern half of the country and manufactures envelopes at nine domestic plants. pp or t@ ca ps to ne The packaging segment manufactures, markets, and distributes various bleached paperboard, kraft paper and board, corrugated shipping containers, food containers, folding cartons and cartons for liquid products. These products are manufactured at two domestic mills and two mills located in Brazil; paper and sold to markets board are converted into packaging products at plants located in the eastern United States, Brazil and the Czech Republic. These products are sold primarily located in the United States with other operations conducted additional markets located in Brazil, Europe, Asia and the Pacific Rim. In Brazil, Rigesa is a major producer of paperboard and corrugated packaging for the markets of that country. Operating results for Rigesa are subject to the economic conditions in Brazil, including its inflation and currency fluctuations. su The chemical segment manufactures products at four domestic locations. Major product groups are: activated carbon products and services; printing ink resins and lignin-based surfactants; tall oil fatty acid, rosin and derivative products. The corporate and other segment includes the company's forestry operations and income and expense items and activities not directly associated with segment operations, including corporate support staff services and related assets and liabilities. The segments are measured on operating profits before interest expense, income taxes, minority interest, extraordinary items and cumulative effect of accounting changes, except for Rigesa which is included in the Packaging Segment, in the packaging segment, whose operating profit includes interest income of $13.2 million in 2007 (2006-$14.6 million, 2005-$10.3 million) and interest expense of $4.6 million in 2007 (2006-$4.5 million, 2005-$6.1 million). The segments follow the same accounting principles described in the Summary of Significant Accounting Policies. Sales between the segments are recorded primarily at market prices. The restructuring charge following the completion of the company's strategic review related to paper, packaging, and chemicals was $21.2 million, $57.7 million and $1.6 million, respectively. No single customer accounts for 10% or more of consolidated trade sales in 2007. In 2006 and 2005, sales to a single customer accounted for approximately 11% of consolidated sales primarily from the company's packaging segment. Total sales outside of the United States, including sales of our foreign operating subsidiaries, accounted for approximately $663,483,000 in 2007 (2006-$709,567,000, 2005$741,902,000). Export sales from the United States amounted to $504,480,000 in 2007 (2006-$499,792,000, 2005-$487,698,000). In thousands, except per share data Net income First Second Third Fourth Year t@ $ 119,239 127,052 139,515 176,907 562,713 $ $ $ 25,222 27,295 34,986 23,673 111,176 Net income per common share-basic First $ .25 Second .27 Third .35 Fourth .24 Year $1.11 Net income per common share-diluted First $ .25 Second .27 Third .35 Fourth .24 Year $1.11 g. n hi n to ne $ 702,113 724,187 727,826 731,791 $2,885,917 $ $ $ $ 133,682 139,135 130,835 139,644 543,296 32,516 34,606 31,674 33,217 132,013 .32 .34 .31 .33 $1.30 2005 $ 736,355 724,593 738,227 783,113 $2,982,288 $ 131,145 134,929 137,467 157,545 561,086 ps 650,715 679,481 700,202 771,451 $2,801,849 2006 ca $ pp or Gross profit First Second Third Fourth Year 2007 su Quarter Sales First Second Third Fourth Year pu bl is N. Selected quarterly information [unaudited] et M. Business Combination In October 2007, Eastvaco signed a definitive agreement to acquire Temple-Inland's bleached paperboard mill in Evadale, TX. The company will pay $575 million for the mill's fixed assets and approximately $50 million for working capital. The acquisition will be accounted for as a purchase. The transaction is scheduled to close in December 2007. In connection with this pending acquisition, on November 5, 2007, the company issued $400,000,000 in notes comprised of $200,000,000 of 6.85% notes due November 15, 2004 and $200,000,000 of 7.10% notes due November 15, 2009. $ $ $ 35,510 37,940 37,538 51,712 162,700 $ $ $ $ .32 .34 .31 .33 $1.30 .35 .37 .37 .51 $1.60 .35 .37 .37 .50 $1.58 ELEVEN - YEAR COMPARISON Year ended October 31 2007 2006 2005 2004 2003 $3,272 104 281 c 104 212 1.30 1.60 2.09 2.78 1.03 1.11 1.30 1.58 2.07 2.76 1.03 280 281 269 240 230 19,070 20,140 20,240 $88 $89 .88 21.65 .88 22.39 102 103 13,890 102 102 101 102 101 101 $90 $90 .88 22.35 219 g. n hi n 20,490 pu bl is 101 102 $78 $74 to ne 100 100 20,760 et 1.11 .88 21.69 .77 .73 1/3 20.49 18.48 pp or Per share: Dividends Book value 163 ps Cash dividends [in millions] 132 b ca COMMON STOCK Number of common shareholders Weighted average number of shares outstanding [in millions] Basic Diluted 111 a t@ Net income Net income per share - basic Net income per share - diluted Depreciation and amortization $2,607 283 EARNINGS, in millions, except per share data Sales $2,802 $2,886 $2,982 $3,045 Net income before extraordinary charge and cumulative effect of accounting changes 111 132 163 212 2002 su FINANCIAL POSITION, in millions Working capital $313 Current ratio ? timberlands, net $3,581 Total assets 4,897 Long-term obligations 1,502 Shareholders' equity 2,171 Debt to total capital ?? OPERATIONS Primary production of paper,paperboard and market pulp [tons, in thousands] 2,992 New investment in plant and timberlands [in millions] $232 Acres of timberlands $272 $400 $297 $358 ? ?? ? ? $3,802 $3,684 $3,354 $3,140 5,009 4,899 4,437 4,253 $269 $3,063 3,983 1,526 1,513 1,153 1,147 1,234 2,246 2,279 2,210 2,081 1,862 ? ? ? ? 3,028 3,058 3,001 3,105 2,848 $420 $614 $511 $309 $207 owned [in tons] Employees 1,446 12,750 1,465 13,070 1,461 13,370 1,452 13,430 1,453 14,300 1,453 14,170 The following per share data is for basic and diluted: a 2007 results include an after-tax charge for restructuring of $49 million, or $.49 per share, and a credit of $15 million, or $.15 per share, for a release of deferred taxes. b 2006 results include an after-tax charge for restructuring of $3 million, or $.03 per share. c 2003 results include an after-tax extraordinary charge of $2 million, or $.02 per share, for the extinguishment of debt. 2000 EARNINGS, in millions, except per share data Sales $2,345 $2,336 Net income before extraordinary charge and cumulative effect of accounting changes 57 136 1.04 1.04 Cash dividends [in millions] Per share: Dividends Book value $2,411 $2,284 137 188 223 137 e 188 223 1.40 1.93 2.30 1.36 1.39 1.92 2.28 183 179 169 156 14,970 15,020 t@ pp or su COMMON STOCK Number of common shareholders Weighted average number of shares outstanding [in millions] Basic Diluted $2,301 1997 1.37 ca 195 136 1998 to ne 104d ps Net income Net income per share - basic Net income per share - diluted Depreciation and amortization 1999 g. n 2001 pu bl is Year ended October 31 hi n ELEVEN - YEAR COMPARISON, continued et Eastvaco Corporation and consolidated subsidiary companies 14,570 15,630 15,530 100 101 99 100 98 99 98 98 97 98 $73 $73 $70 $66 $61 .73 1/3 18.18 .73 1/3 17.84 FINANCIAL POSITION, dollars in millions Working capital $244 $319 Current ratio ? ? Plant and timberlands, net $3,078 $2,838 Total assets 3,928 3,704 Long-term obligations 1,258 1,055 Shareholders' equity 1,824 1,777 Debt to total .70 5/6 17.21 .67 1/2 16.53 .62 2/3 15.27 $310 ? $370 ? $328 ? $2,675 3,462 970 1,699 $2,539 3,332 961 1,619 $2,240 2,961 768 1,488 Capital ratio ? OPERATIONS Primary production of paper, paperboard and market pulp [tons, in thousands] New investment in plant and timberlands [in millions] Acres of timberlands 2,626 2,595 2,587 2,512 2,499 $442 $352 $322 $472 $537 1,487 15,040 1,467 14,960 1,462 14,440 1,468 14,520 ? ? ? 1,483 14,440 su pp or t@ ca ps to ne pu bl is hi n g. n et owned [in thousands] Employees ? Name Financial vs. Managerial Accounting Terry Thompson, the treasure, has a dilemma, two of his supervisors are leaving, Jeff, supervisor of the management accounting function and Fred, supervisor of the financial accounting department. Terry's background is finance and has only a basic understanding of accounting. He comes to you and asks, \"I need to either hire someone from the outside or promote internally. What qualifications should I seek in each of the positions and what role do these positions play in strategic planning?\" su pp or t@ ca ps to ne pu bl is hi n g. n et Required: 1. Answer each of the two questions asked by Terry. Your answer should be in the form of a well prepared memo. 2. In your own words, what is the difference between a financial and managerial accountant? Name Global Commerce - Research Project The president of Eastvaco is considering recommending to the Board of Directors expanding into the Asian market. He suggests that the Company open a manufacturing facility similar to the Charlotte facility. The plant would purchase its raw material from local sources and produce envelopes, paper cups and packaging. He contends since the Charlotte plant is having difficulty obtaining recycled material and he does not want to tarnish the plant's \"green\" image. The Asian plant could produce non-green products. The product would be marketing heavily in China and Indonesia (where the plant would be established). Excess production would be sent back to the States to meet market demand. Required: You are asked by the President to prepare a short report regarding the following issues: et g. n hi n b. c. What information regarding the Asian rim region should the President include in his report to the Board? Eastvaco's strengths and weaknesses that would help and/or hinder the Asian expansion. Your conclusions and recommendations regarding the proposed expansion. pu bl is a. su pp or t@ ca ps to ne Organize your answer by requirement. Your answer should not exceed three pages and be well written. There is no minimum page requirement. This exercise requires research, imagination and writing skills. Name Initial Analysis of Eastvaco and the Charlotte Facility Read the financial statements and supplemental information provided by the 10-K submission and the Charlotte facility schedules. Attempt to gain some insight into how the company and its Charlotte plant are doing. Specifically, answer the following: su pp or t@ ca ps to ne pu bl is hi n g. n et Required: 1. What do you see as Eastvaco's strengths and weaknesses? Manufacturing Alternatives and Relevant Costs NAME The Charlotte facility 's supply of recycled materials may no longer support three product lines. In addition , the following condensed quarterly income statement by product line has been provided. The General Manager of the Charlotte operations is concerned that envelopes is showing a $(15,000) loss. He is convinced that, regardless whether the Company can secure additional recycled materials, the envelop