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I 2 3 5 co co 6 ~ r. (0 7 8 11 ~ ~ CI) 0 z 13 ~ H 14 En I 15 ~ a 16 0 z 17 18 19 22 23 24 PSI?.I11+ )wYY?AkIB X NQ0FAE?]1fMD 1984 C414pORAS AllAIRS WORLD OMFSUNC8 1CT8 BRM, UW YCU, ` Thursday At#asrnoo» sess3,c:a 8*pt.mber 13, 1984 Mr. Hugh Cnl.lmaa, presiding I N D S X am Pr+esast;atl.on& "Iwaf" Mr. Cul]aman . . . . . . . . . . . . . . 16-38, 51, 5'4, 56:59 Panel DisoUssiou . . . . . Moderator Guy L. Smith Dr. Larry M. Sykes . . Mr. James 8. Starkey . Mr. Carl Johnson . . . 29 - 54 0 0 . . 28,29 . , . . . 39-32,47,53 . . . . . 3Z-40,48,55 . • . . . . . , . . . . 40-47, 51, 52 Question-and-Answer Period . . . . . . . . . 54-39 25

t 2 4 22 23 24 25 T3 MAIRKM SCA3'Tt Okay, cabld we settle down and get the doors 0losed and 9et under way? I'm Qeftaia that none of us would have any dis- agY+.ese>nt with the comment that what we do iu our respective areas every day is extrenwly important -- right? But I think what is of moxe importance to us as we do our jobs every day is the reoogtiitioa that we have that support from the top. it's awfully important and we look to other industries, to othat compunies, and you see that support in varying degrefs, and it's pretty much amixxed bag. So I think that one significant thing that we have going for us at Philip Morris is the fact that we have people like Hugh Cullman, Vice-Chairman of Philip Morris Incorporated, who cares about and appreciates the efforts that we make on behalf of the company, and he doesn't just talk about thatt he brings his support to that effort, whether it's a trip out in the country to explain a program, or to provide his presence to help us make our points as we're talking to elected and appointed officials. He's always there. So we're extremely pleased to have Hugh Cullman here today to preside, but not only that: to check in on Tuesday nightr to hang in there with us, to visit the workshops, to sit in on the plenary sessions. That says something about our company. So, ladies and gentlemen, a big corporate affairs

1 2 3 4 5 6 1-3 round of applause for Hugh thullman; (,Applause ) MR. HtlM CtA.TMo Ttianic you very much, Stan, and thank all of yout As Stan noted, I'm now in this job but I feel at ban with you. For ona thing, STan and I have had good introductive relationships with Philip Morris U.S.A. H 00 a) CO c? fl c N 7 Further, in ays4my years in 0ozpoaat:e, International and ~ 8 U.S.A., I have developed a!eep appreciation of the 9 0 important roll all of you play in helping oreate a climate 10 ~r of public undertitanding and good will, in which the w z 11 e corporation ctan and needs to function, and I' 11 have more 12 U') to say on that later this afternoon. z 13 ~ Over the years, I'va not only gotten to know H 14 ~ many of you in this room, I've corne to depend on you, 15 ~' and with good reason. You are dependable and you do deliver. 0 16 o Philip Morris knows well how to do its work as a quality z 17 0 producer and marketeer of its high quality consumer produvtsx. U 18 ~ Now, more than ever, the corporat.ion will depend on you ~ 19 0 to give it a reasonable chance to continue to do just that. H 20 z I'm proud to be able to call you my team. x w 21 z Let's start right off with a film presentation 22 of a subject that makes a critical difference to Philip 23 Morris. 24 (Film Presentation) 25 11 mR. CuwaNr I hope this assures you that the

1 2 3 4 5 1-4 TAP proqram is vital to our preservation ability in the markat and we vc>uat on all o# you to qive it your maxinua suppora. Now, 1'd like to ask Bill MvCoy, President and ~ Qhiet Rxecutivs Otxiear Qf Philip Morris Industrial to a) 6C' giwa us a current rundoxn and update on this Philip Morris ~ 7 ~ i dompar,y. Bill? ~ 8 o MR. WlLLIAat D. Md= i Shaak you, Hugh, and thank 9 M ~ you all: I'm delighted to be her., possibly to dispel 10 z the rumor that I'm the phantom of P2ii.li plip Morris. People 11 ~ soe me aroua;d but thsy'se not all that sure what I do 12 ~ and I`d like to taks you out of your abysmal ignorance. z 13 ~ But first I'd like to give you a test. Let me start with En 14 1 a g$w $lides. I'm going to show you four items and ask 15 -9 you what they have in oomnan. 16 z sirst, a bag of dog food. Second, a bar of soap. .~ 17 a, Third, a bottle of detergent. And finally, a paper napkin. W 18 a Pigured it out? Th, paper, the labels. Philip Morris ~ 19 z 0' Industrial makes and sells the specialized paper and the F 20 ~ ~ labels that go into every one of these items. And for H 21 z those of you who are tri-& buffs -- a more aurrent item, 22 when you play Trivial Pursuits, who makes the paper 23 in the cards and the playing board? You got it: 24 And I mean Sell. We're no diifernnt. We have our JR's, 25 our pg's, the boys in Atlanta and the guys from Purchase.

1 2 3 4 5 6 7 1-5 Howevea* in eaab of our specialized areas, we've established J.aalMs=ship positions aRd gaised very significant marlee# shares. How have w done it? A good old Philip Morris statement. Sensitivity to the market, high quality achieved thrnuqh talemted peoplt, supported by the b.st equipment and advanced tetahaology, a superior sales force and I appropri.ate use of publia affairs. In most industries ~ 8 o ths expression "That looka pretty good on paper" is meant 9 O as a cyniaal putdwn. At Philip Morris it's the life blood 10 z of our success. And whether you're talking about napkins, 11 ~ dog food bags, high quality printing paper or labels, 12 ~ at Philip Morris IndustYialr paper is our business. z 13 [~ This afternoon I'd like to tell you what we're U) 14 ~ doing and some of our plans for Philip Morris Industrial 15 ~ and hopefully some of'tha things that we do selling paper 16 z may provide food for thought in your areas of operation. 17 09 p.' At Philip Morris Industrial we're four companies with fivs w 18 "~ ~ 19 p' H' 20 z~ oc H 21 z; 22 23 24 25 plant locations, with C- Tissue Mills in Menasha, Wisconsin, Plainwell Paper Company in Plainwell, Michigan, Niokal Aid Paper Company in Superior, Wisconsin and Rovhe Label Company, with a label plant in Evansville, Indiana and a beer and beverage carrier plant in Port Atkinson, Wisoonsin, pronounced "aook" but spelled P[-o-c-h as with New York's favorite m:ajor. Each of these companies has its own highly special--::.

1 2 3 1-6 isted amarket. Sach of them 3ias a leadership position in at least'one significant eegwent of their serlcetplaos and am* is involved in a race to continue to stay there. At Philip Morris Industrial the paper chase is ~. always ©n. The XatrketFplaaa for our product in every bit 6 CO 7 ~ as oowat#,tive as that for cigarettes, soft dsincs, beer ~ ~ 8 c~ and real estate. tvwry day we face similar challenges, we ° try to create new opportunities to aoatsblish leadership 9 M ~ positions to gain significant market shares. 10 ~: z het's start with Wisconsin Tissue. Here we sell 11 12 products similar to the way most of Philip Morris products are sold, through distribution networks. We sell to food restaurant supPlg aompaaies and paper servics com~aanies , ~, 14 I merchants and janitorial supply houses. We have selective 15 Q distribution. That distinguishes us somewhat from our competi- 16 z tors who sell to anyone willing to buy. We try to select 17 O 0 the best and ride with them. w 18 ~ Like PDd U. S.A. , our sales reps don' t actually Z 19 O take in-user orders but they provide services, ideas and E 20 Z calls for customers and ~ potential customers of our distribu- 21 21 z tion network. With Constant Tissue success, has built itself 22 f,I around high margin : peaialtiss. It is currently the United 23 states market leader with a 291 share in the high quality 24 rnul.tiply napkins used in the eat-out business. 25 11 However, we realize that napkins alone don't build

1-7 1 3 4 22 23 24 25 raPires. So since 1991 aro'tr+s been diversifying otu product liae. Ne Am make papeF t0W.ls, bathroom tissu. and fsdial tissttrlr and are a full-line industrial paper prodttoosr. W+.'v* also set out to becsa0e the low-cost producer in the indWttry: while sustaining quality as good or better than the leader of that paper aaspany. We-'ve ach3,eved our oost goals because we're esperts in the reverse of printing, taking inks off paper. As a result, we're the only vosapany in our field, other than Fort Howard, who uses 1000 recycled paper in our tabletop products. We're tops at recycsl- ing, We also have installed a state-oi-the-art, most ef fieient paper machine in th. industry. That gives us the capability to compete head-on with all companies. We're continuing to work on-line extensions from our current products. And we're looking both in the United States and abroad for opportunities in the industrial tissue market. If selling tissue is like selling cigarettes and beer, selling specialty paper is like selling a point of view to an elected official. It takes a hand-tailored approach, which is what we do at our next two largest operations, Plainwell Paper and Nickel Aid Paper Company. Our sales people work hand-in-hand with R&D and Manufacturing and they are problem-solvers. They can invent a product in response to the customer problem or need-..:or they can modify a current product in response to a performance requirement.

t 2 3 4' 5 6 7 Z-8 plainwell Paper Company, which in 1903 acaounted for 14• ot Plsil.ip Morris Industrial salea r makss product with aames like eleotro-•based paper and index tag stock with a major position in:.:xeleaae backing papers. You may not know what CO I they are but you've used these products over and ov*r, 0 CID C? probably not even knowing that Philip Morris has anything ~ ~ to do with them. The nas+e tags at conventions, the price ~r. 8~ stickers and labels on the products in your neighborhood '..: ~49 O store or supermarket and even the floor tiles you find in your 10 z kitchen...The part you throw away, which is the highly 11 21 technical part of that particular product, is what we make. 12 ?', Plainwell custom-designs and manufactures the backing z. 13 19for all these kinds of items. In fact, Plainwell is the W 14 Ii leader in the market with a 28% share and, oddly enough, 15 Q the second largest share in that industry is Nickel Aid ~ 16 z Paper Company. Between us, the two companies, we have over 17 °~ 0 50% of that market. Plainwell also spee7ialises in the ~ 18 ~ market for coated papers, the ones with the glossy finish, ~ 19 z 0 the premium printing paper often custom-designed to solve F 20 Z immediate problems, like 1?~Linwell's cashmere. It's the ~ 21 z' whitest and brightest paper in the U.S. market. 22 23 24 25 it provides the opportunity for color rendition and superior graphics unequaled in the industry. It'x frequently used in Philip Morris brochures and has been used in the annual report for several years.

1 2 .3 4 22 23 24 25 1-9 And to majcket it, we provide the equivalent of point otpuzahase. This is a pdostr depicting th* color renditions and the brrtghtn.ss of ou= new.st produat, oal].ed Solitaire, the No. 1 premium printing paper used in the highest quality printing broohuanre, such as those that you see in your automobile agenvy from Detroit and just the very linast printing of arts books and things of that nature where color rendition, halftones and brightness are critical to the design of the brochure. It hangs outside my office and the staff continually kids me about it makes them hungry and "When is lunch?" It's part of our c:ampaign to make sure that the users of paper specify Plainwell paper for high quality printing, and how could they settle for less? Long-term? Plainwell is looking for more high margin specialty areas. PAwAmber the bar of soap? Plainwell produces the outer wrapping. It's not just a piece of papert it's an inprsgnated coated paper in response to the industry's requirement for a wrapper that prevents mildew. Remember the box of dog food I showed N ~ ' you? That's from Nickel Aid, the world's largest producer of CA glycine and grease-proof papers, used in such things as N N dog food and pet food packaging, candy bars, crackers, ~ potato chips and other snack foods. Yes, we sell to 8rito- ~ Lay, we sell to Eagle Brand. I don't mind making money on your competitors. Profit is profit.

1 2 4 5 1-10 But keepieg profit the*e days is becoming one of Wiakwl Aid's largest oballemqes. Classic paclcagi.ag has made some significant. inroads into the danse paper busin.as. it's been declining. Classia, in some cases, is a b+stter ~ product that provides better presrrvation for things like a) 6 cclo) ~ hyd~cost~opica r~ndy bare, which would be the Granola kind of 7 N I a bar. What do we do about it? Ro11 over? Not lately. 8 o We're facing that otiallas=ge by creating now opportunities. 9 o Ww don't want to go into plastics. So Nickel.Aid has been 10 z switching fresn the inside to the outside of many of those 11 ~ sams produats. We're developing packaging products not 12 c~n z 13 ~ ties of plastics but are easy to prevent -- to print and U) 14 I! provide superior graphics for consumer-based products 15 -9 where impulse buying and attractiveness on the shelf is 16 C~ z 17 lq~l the key. 0 our paper-making exQertiss and the new tec:hnolo- U w 18 ~ ~ 19 O F 20 z x H 21 Z 22 23 24 25 for ths barrier vharaoteristiQs, not for the sealing proper- gies we'rs entering into create new opportunities for Nickel Aid to produce still other things, suchas label papers, the printable portion of spiral-wound cans, such as your citrus juice and the oil you buy at your gas station. Now for our role in the beer industry. Koch Labels accounted for 13$ of our sales and a third of our pretax income. Koch is in three markets -- beer labels, non-beer labels and beer carriers. And yet Anhauser Busch