MeadWestvaco Corporation (MeadWestvaco) has reported net sales of $6.63 billion for the year-end 2008, compared with the net sales of $6.40 billion in the previous year-end. It has also reported net income of $90 million, or $0.52 per share, for the year-end 2008, compared with the net income of $285 million, $1.56 per share, in the previous year-end.

MeadWestvaco generated in excess of $175 million in cash flow from continuing operations during the quarter as the company aggressively managed working capital and controlled discretionary spending to improve its already strong financial position. MeadWestvaco is capitalizing on this strength and continuing to focus on capturing the highest-value opportunities in targeted global packaging markets. As part of this strategy to enhance its business platform and improve long-term financial performance, MeadWestvaco is accelerating elements of a cost reduction program to achieve an additional $100 million in reduced corporate and business overhead expenses and $25 million in savings from facility closures and restructuring this year.

“Before and during this difficult period, we’ve taken bold, proactive steps to secure our financial position and ensure that we remain a strong competitor in our targeted markets,” said John A. Luke, Jr., chairman and chief executive officer. “We have fortified our cash position and moved aggressively to reduce our costs, all while continuing to execute our strategic priorities. Our actions reflect an intense focus on maximizing value for our shareholders through this period of economic uncertainty and into the stronger and more stable times that are sure to come.”

Fourth Quarter Results

Results for the fourth quarter of 2008 reflect the continued impact of severe input cost inflation and lower demand due to declining global economic conditions. MeadWestvaco aggressively responded to these factors by pursuing price increases across its businesses, by adjusting production to match demand and by tightly managing cash flow, including working capital and capital expenditures. Fourth quarter 2008 sales from continuing operations were $1.60 billion, 7% lower than fourth quarter 2007 sales from continuing operations of $1.72 billion. Fourth quarter loss from continuing operations was $16 million, or $0.09 per share, and included after-tax restructuring charges of $33 million, or $0.19 per share, related to facility closures, asset write-downs and employee separation costs mainly due to the company’s business improvement actions announced on January 15, 2009.

In the fourth quarter of 2007, MeadWestvaco reported income from continuing operations of $146 million, or $0.80 per share. The results for the fourth quarter of 2007 included an after-tax gain of $102 million, or $0.56 per share, related to the sale of non-strategic forestlands. Also included in the 2007 results are after-tax restructuring charges of $26 million, or $0.14 per share, related to facility closures, asset write-downs and employee separation costs, and after-tax one-time costs of $3 million, or $0.02 per share, related to the company’s previous cost initiative.

Full-Year Results

Full-year 2008 sales from continuing operations were $6.64 billion, 4% higher than 2007 sales from continuing operations of $6.41 billion. Volume and price gains in the mill business drove the strong growth. Full-year 2008 income from continuing operations was $80 million, or $0.46 per share, and included after-tax restructuring charges of $44 million, or $0.26 per share, related to facility closures, asset write-downs and employee separation costs.

Full-year 2007 income from continuing operations was $266 million, or $1.45 per share. The results for 2007 included an after-tax gain of $155 million, or $0.84 per share, related to the sale of non-strategic forestlands. Also included in the 2007 results are aftertax restructuring charges of $54 million, or $0.29 per share, related to facility closures, asset write-downs and employee separation costs, and after-tax one-time costs of $15 million, or $0.08 per share, related to the company’s previous cost initiative.

On July 1, 2008, MeadWestvaco completed the sale of its North Charleston, S.C., kraft paper mill and related assets for net proceeds of $466 million. For the current and prior year reporting periods, the company is reporting the results of the North Charleston mill and related assets as discontinued operations. The results of the North Charleston mill were previously included in the Packaging Resources segment. Results from discontinued operations were after-tax income of $2 million, or $0.02 per share, in the fourth quarter of 2007. Full-year 2008 results from discontinued operations were after-tax income of $10 million, or $0.06 per share, compared to after-tax income of $19 million, or $0.11 per share, in 2007.

Packaging Resources

In the Packaging Resources business, segment profit was $45 million in the fourth quarter of 2008 compared to $73 million in the fourth quarter of 2007. Sales increased 2% to $632 million in the fourth quarter of 2008 versus $621 million in the fourth quarter of 2007. In the fourth quarter of 2008, this segment improved pricing and product mix by $35 million year-over-year and managed to hold overall volume relatively stable in a difficult demand environment. These gains were more than offset by increased costs for energy, raw materials and freight, which were $45 million higher year-over-year, and by the impact of unfavorable foreign currency exchange. Rigesa, the company’s Brazilian operation, posted quarterly sales growth, reflecting continued solid demand for value-added corrugated packaging solutions in the domestic Brazilian market.

The segment responded to lower demand in the fourth quarter by reducing mill production of coated unbleached kraft (CNK) by 35,000 tons compared to the prior year, which unfavorably impacted productivity. Versus the same year-ago quarter, bleached board shipments increased 5 % and were driven by continued gains in commercial print and liquid packaging markets. Bleached board pricing increased 6% in the fourth quarter of 2008. Versus the same year-ago quarter, CNK pricing increased 5%, while shipments declined 12%, reflecting lower demand due to customer de-stocking. While the overall demand outlook remains uncertain, backlogs for both bleached and coated unbleached kraft paperboard are currently at seasonal levels of about two weeks. The segment is vigilantly tracking demand signals and will continue to take actions to manage production to demand.

The Packaging Resources segment’s full-year 2008 profit from continuing operations was $195 million compared to $281 million in 2007. The decline in profit was primarily due to record cost inflation in energy, raw materials and freight the company experienced throughout 2008. Sales in 2008 increased 7% to $2.67 billion compared to $2.50 billion in 2007. Higher sales were driven by improved pricing and mix in the company’s key paperboard grades and by volume growth in bleached board.

Consumer Solutions

In the Consumer Solutions business, segment profit was $11 million in the fourth quarter of 2008 compared to $16 million in the fourth quarter of 2007. Sales decreased 10% to $596 million in the fourth quarter of 2008 compared to $659 million in the fourth quarter of 2007. Pricing and mix improved $10 million and offset $6 million of higher costs for energy, raw material and freight as the segment began to benefit from pricing actions to offset significant oil-based raw materials inflation, principally plastic resin. Lower overall sales and profit were due to significant volume declines in personal care and media packaging as a result of weak economic conditions. This segment increased its market share in the home and garden market for trigger sprayers and other dispensers, delivered growth with Shellpak™ in the healthcare packaging market, and had solid performance in beverage packaging, especially in North America.

As part of the previously announced actions to refocus its business on the highest value packaging opportunities, the segment is streamlining its product line and manufacturing footprint, including the recent closure of four converting locations.