By Susan Kelly of Raine Consulting May 8, 2003 - Denver, CO - based Mail-Well (NYSE: MWL) announces their first quarter results for 2003. First quarter sales were $427 million, a 3.6% decrease from the $443 million in sales for the same quarter in 2002. Net income was $3.1 million, or $0.06 per share, as compared to a net loss of $133.4 million for the first quarter 2002. The results reflected a $0.7 million restructuring charge together with an after tax gain of $2.5 million on the disposition of discontinued digital graphics operations. Topics include: * Summary Financial Results and Guidance 2003 * Segment Results * Q & A Summary Financials and Guidance 2003 Mr. Paul Reilly, Chairman, President and CEO, started the conference call by stating the EBITDA was $30.7 million which was an 86.3% improvement overall from last year however, only a 5.5% improvement over the $29.2 million when including ongoing operations. He reiterated the press release statement about their Q2 guidance for further EBITDA improvement and for the full year to be in $130-$140 million range. Net cash used in the first quarter was $13.4 million as compared to $7.7 million for the same period in 2002. The increase was due to an increase in working capital and they expect it to reverse in the upcoming quarters. They expect the operations will contribute $75 million in cash for the full year. Capital expenditures were $6.4 million out of an expected $35-$40 million for the full year 2003. First quarter 2003 had total debt of $777 million which commensurate with the increase of working capital. In first quarter they drew $116 million from their bank line with $102 million of further availability. Segment Results Commercial Print Group: Print sales were $198 million, which was a 3.8% increase from first quarter 2003. Revenues were helped by extra sales from American Express. The Print segment is totally focused on improving profitability despite negative market trends. In first quarter 2003, they increased EBITDA 160% increase over last year's first quarter to $8.6 million. They expect to see a similar level of performance for second quarter 2003. The Chairman stated that this has been achieved by a "growing number of customer wins and contracts. Over time this will time will reduce our total dependence on transactional work. This is how we can grow ourselves in a down market. National and local capacity presence is the reason we can service customers with multiple services and products." Envelope Group: The Chairman maintains the same drumbeat that they have the strongest financials in the industry. Despite a 15.4% decrease in sales from $201 million in first quarter 2002 to $179 million in 2003, the EBITDA remains very strong going from $13 million in first quarter 2002 to $23 million for same period in 2003; a 77% increase. The Chairman cautioned investors away from guidance given on the last call. When, and if, paper prices go up, Mail-Well now does not expect to be able to pass the increase to customers. Therefore revenues will not increase which puts pressure on margins overall. Good news was received from USPS, which means there will be no postal increases until 2006. "This action provides stability of a significant cost component for direct mail." Print Office Products: First quarter performance 2003 was very similar to the same period in 2002. Sales were $50.3 million with EBITDA of $5.3 million. Erosion of traditional document sales continues while specialty documents and labels are holding firm. The Chairman gave an update on two Mail-Well Initiatives: Total Company Selling: "Total Company Selling has become the strategic glue for the company. A series of sales and marketing initiatives will result in a 5% increase in organic growth or a $10 million increase in sales. We believe we have already achieved one-third of that benefit to date. We believe Total Company Selling has been instrumental for our third quarter in a row of increased market share." Mobilization Initiative: Teams have identified 7 success factors and these have been linked to employee's performance. Mail-Well has finished a company-wide employee survey and they are using the results to boost customer service. Next quarter, Mail-Well is launching a customer-wide survey to make sure they can satisfy and retain customers. "This program will institutionalize company transformation, continuous improvement, and employee engagement." Q&A: 1. The Automotive business and the visibility of their respective print volumes are looking at an earlier than third quarter season in 2003. Some of Mail-Well's new product sales point to another successful car season. For example, one customer will be saving $300K without having to do any photography and will use CAD/CAM technologies instead. 2. Direct mail volumes have been impacted by the war as well as reduced advertising spending. The Chairman remained firm in his conviction that it is a reasonable belief that the markets will pick up for the balance of the year. 3. Mail-Well received uncoated free sheet paper price increases last October. About 50% of these increases were passed on to the customers, which is less than usual because of market excess capacity. Given the operational conditions of the pulp and paper markets, the Chairman believes paper prices will remain stable or decrease in 2003. 4. It will be another 6 months to a year before Mail-Well will be looking at strategic acquisitions. When they do, their priorities will be: envelope businesses, print that would increase local market share, or opportunities to expand their company offering to leverage their Total Company Selling approach. 5. No free cash flow was produced in first quarter 2003 because of swing in working capital. Mail-Well wants to keep payables in line with receivables as well as inventories. 6. The trigger to relief from overcapacity and pricing pressures is a more robust growth market. The Chairman believes they are at the end of a three-year market decrease and that economic improvement should be expected for the upcoming quarters. A year from now analysts should expect stable prices. The forward indicators to prove that market prices will stabilize include increased advertising spending and postal volumes. 7. Mail-Well's Total Company Selling program is selling multiple product lines whereas National Accounts is about working with customers in multiple locations. They believe they are "getting more traction from Total Company Selling as Mail-Well is uniquely positioned to provide printing, envelopes, documents, and labels." 8. Second quarter is the weakest quarter but their guidance confidence comes from their sales forecast visibility, which they believe is significantly improved from last year's second quarter. 9. Envelope price change in the first quarter was a 4% decrease. Mail-Well has been looking at the first Gulf War in the early 1990's and found that the most recent war is pacing the same way for envelope demand. No numbers were available to confirm these trends but they inferred that the demand increase is "fairly dramatic." 10. Medical cost increases are going up $10 million in 2003 and they are making a $7.5 million accrual at this time. 11. Print margins have been performing at less than 1% of operating income and Mail-Well's goal is a 6-8% goal. They will achieve this goal through plant efficiencies, Total Company Selling approach, and the Mobilization Program.