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TODAYS DISCUSSION
NYO-ZWB887-20050927-SN1
SIMILAR P/E
NYO-ZWB887-20050927-SN1
PE Ratio
21
19
* Excluding acquisition, divestiture and foreign exchange impact Source: Compustat; Zacks; McKinsey Corporate Performance Center
NYO-ZWB887-20050927-SN1
PE Ratio
21
19
12
* Excluding acquisition, divestiture and foreign exchange impact Source: Compustat; Zacks; McKinsey Corporate Performance Center
NYO-ZWB887-20050927-SN1
PE Ratio
21
60
19
20
12
* Excluding acquisition, divestiture and foreign exchange impact Source: Compustat; Zacks; McKinsey Corporate Performance Center
NYO-ZWB887-20050927-SN1
100 (25) 75
105 (26) 79
NYO-ZWB887-20050927-SN1
NYO-ZWB887-20050927-SN1
Growth 6%
11
16
21
9%
11
19
27
VALUE OF GROWTH
NYO-ZWB887-20050927-SN1
NYO-ZWB887-20050927-SN1
25
15 7
12
20
9
NYO-ZWB887-20050927-SN1
0.10-0.50 -0.25-0.40
-0.05-0.20
10
NYO-ZWB887-20050927-SN1
2.6 2.3
13
12 9
1.0
U.S.
Europe
Asia
U.S.
Europe
Asia
11
NYO-ZWB887-20050927-SN1
20
15
10
0 1963
1967
1971
1975
1979
1983
1987
1991
1995
1999
2003
* Average of beginning and end of year S&P 500 median P/E Source: McKinsey analysis
12
NYO-ZWB887-20050927-SN1
Median ROIC
8% 6% 4% 2% 0% 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998
13
NYO-ZWB887-20050927-SN1
Corp. profits/GDP
7% 5% 3% 1% -1% -3% 1929 1935 1941 1947 1953 1959 1965 1971 1977 1983 1989 1995
Average = 5.5%
14
NYO-ZWB887-20050927-SN1
20
Median P/E*
15
10
Inflation
0 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003
* Average of beginning and end of year S&P 500 median P/E Source: McKinsey analysis
15
TODAYS DISCUSSION
NYO-ZWB887-20050927-SN1
16
NYO-ZWB887-20050927-SN1
80 55 40 39 28 21 20 12 8
17
NYO-ZWB887-20050927-SN1
3-4
1-2
1-2
18
NYO-ZWB887-20050927-SN1
A B C
D
20 19 18 20 21 16 18
4.0 4.1
5.5
5.7
E
F G
4.7
5.4
19
NYO-ZWB887-20050927-SN1
50.00 40.00 1995 30.00 20.00 10.00 Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 Date of Forecast 1985 1986 1988 1989 1990 1987 1991 1993 1992 1994 1999 1997 1998 1996
20
NYO-ZWB887-20050927-SN1
DISGUISED
$61
$70
21
NYO-ZWB887-20050927-SN1
35 30 25 20 15 10 5 0 -5
>20
1520
1015 510
<5
10
12
14
22
Years
NYO-ZWB887-20050927-SN1
2.3
3.6
Negative
-4.1
1.0
Lower
Higher
Actual EPS 2002 relative to expected EPS for 2002 short-term surprise
Source: Datastream; IBES; McKinsey analysis 23
NYO-ZWB887-20050927-SN1
Long-term metrics
Growth
Intrinsic Value
NYO-ZWB887-20050927-SN1
Strategic initiatives across multiple time horizons Organizational processes focused on health New dialogue with investors and the Board
25
NYO-ZWB887-20050927-SN1
How would you describe your board's understanding of 5-10 key initiatives needed to achieve long-term objectives?
None Limited
27 1
None
4
42
Good
Complete 11
62
Limited Good
51 4
Complete
26
NYO-ZWB887-20050927-SN1
70 55 40 31 28 14
27
NYO-ZWB887-20050927-SN1
Long-term metrics
Growth
Intrinsic Value