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MeadWestvaco Reports First Quarter Sales Growth of 4.4%

Friday, April 21, 2006

Press release from the issuing company

STAMFORD, Conn.--April 20, 2006-- MeadWestvaco Corporation today reported first quarter net income of $3 million, or $0.02 per share. These results included after-tax restructuring charges of $2 million, or $0.01 per share, and after-tax gains on forestland sales of $2 million, or $0.01 per share. Sales revenue in the first quarter was $1.43 billion, an increase of 4.4% compared to sales revenue of $1.37 billion in the first quarter of 2005. Income from continuing operations declined from 2005 due mainly to significant increases in energy, raw materials and freight, and lower gains on forestland sales, which more than offset higher selling prices, a lower effective tax rate and lower interest expense. "Seasonal markets for our products were firmer in the first quarter, which typically is a slower period for MeadWestvaco," said John A. Luke, Jr., chairman and chief executive officer. "Our continued efforts to increase pricing to combat inflation in energy and raw materials contributed positively to our results, as did our continuing progress on the company's cost initiative to reduce our general and administrative expenses. "During the quarter, we strengthened our packaging platform by aligning our packaging businesses around key customers and global markets," stated Luke. "By leveraging our full packaging capabilities and by continuing to deliver on our cost initiative, we are positioning our company to produce profitable growth and long-term value for our shareholders." Quarterly Comparison In the first quarter of 2005, the company reported a net loss of $6 million, or $0.03 per share, which included an after-tax loss from discontinued operations of $23 million, or $0.11 per share. Income from continuing operations was $17 million, or $0.08 per share. Results in first quarter 2005 included restructuring charges of $3 million, or $0.01 per share, and an after-tax gain on forestland sales of $25 million, or $0.12 per share. Outlook MeadWestvaco expects that demand will remain steady across its business segments and anticipates normal seasonal improvement during the second quarter of 2006. The company plans to continue to seek higher selling prices to offset input costs, which remain at levels well-above the year-ago second quarter. Packaging In its Packaging business, the company's largest segment, operating profit in the first quarter was $60 million compared to $79 million for the same period of 2005. Sales revenue of $1.1 billion was up 3% from the first quarter of 2005. Sales improved due to higher pricing and shipments over the first quarter 2005; however, operating profit for the segment was negatively affected by higher input costs for energy and raw materials. Demand in paperboard packaging was firm, with improvements in markets for liquid aseptic packaging and commercial print. Paperboard production levels reflected capacity reductions due to previously announced indefinite machine shutdowns at the company's Covington, Virginia, and Evadale, Texas, mills. Compared to the first quarter 2005, packaging demand improved in healthcare, was stable for beverage, cosmetics, and personal care products, and was weaker in media and entertainment packaging. Consumer & Office Products In the Consumer & Office Products segment, quarterly operating loss was $5 million, a slight improvement from last year's loss of $6 million. Sales revenue of $195 million increased 7% from $183 million in the prior year. The improvement in operating performance reflects the impact of higher volume, improved product mix, and the back-to-school season in the segment's Brazilian business. Overall the segment continues to be challenged by higher material cost, especially uncoated paper and by low-priced imported products. Specialty Chemicals In the Specialty Chemicals segment, quarterly operating profit was $9 million compared to $4 million in the prior year. Sales revenue for the segment was $114 million, up approximately 19% from $96 million in the first quarter of 2005, reflecting the effects of higher selling prices and volume growth. Growth was evident in markets for performance chemicals used in asphalt, dyes and printing inks as well as for activated carbon for automotive markets and corrosion technology. Overall results continue to be affected by higher raw material costs, especially for crude tall oil and petroleum-based products. Other Items In the first quarter of 2006, prices for energy, raw materials and freight were approximately $50 million higher than the prior year. Cash flow from continuing operations was approximately $100 million during the first quarter, a solid improvement from cash provided by continuing operations of $15 million for the same period last year. Capital spending remained well below depreciation. In the first quarter of 2006, the company began to expense stock options in accordance with SFAS No. 123R, Share-Based Payments. The effect of adoption of SFAS No. 123R was an incremental non-cash expense of approximately $4 million in the quarter ended March 31, 2006, and the full year expense is currently estimated to be an incremental non-cash expense of approximately $15 million before taxes. The tax rate for 2006 is estimated to be approximately 17%. For the first quarter of 2006, the company recorded a favorable tax adjustment. On March 1, 2006, MeadWestvaco paid a regular quarterly dividend of $0.23 per share to stockholders of record at the close of business on February 3, 2006.




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