OVERVIEW

For the three months ended June 30, 2009, MeadWestvaco Corporation ("MeadWestvaco", "MWV" or the "company") reported net income from continuing operations of $125 million, or $0.72 per share, compared to net income from continuing operations of $58 million, or $0.34 per share, for the three months ended June 30, 2008. The results from continuing operations for the three months ended June 30, 2009 include after-tax income of $112 million, or $0.65 per share, from an excise tax credit earned under 2007 legislation enacted to provide a tax credit for companies that use alternative fuel mixtures to produce energy to operate their businesses. This item is described below under "Alternative fuel mixture credit." The results from continuing operations for the three months ended June 30, 2009 also include after-tax restructuring charges of $25 million, or $0.15 per share, related to employee separation costs, asset write-downs and facility closures. The results from continuing operations for the three months ended June 30, 2008 include an after-tax gain of $9 million, or $0.05 per share, from a sale of corporate real estate, and after-tax restructuring charges of $6 million, or $0.03 per share, related to employee separation costs, asset write-downs and facility closures.

For the six months ended June 30, 2009, the company reported net income from continuing operations of $46 million, or $0.27 per share, compared to net income from continuing operations of $50 million, or $0.29 per share, for the six months ended June 30, 2008. The results from continuing operations for the six months ended June 30, 2009 include after-tax income of $112 million, or $0.65 per share, from the alternative fuel mixture credit mentioned above, and after-tax restructuring charges of $76 million, or $0.44 per share, related to employee separation costs, asset write-downs and facility closures. The results from continuing operations for the six months ended June 30, 2008 include after-tax restructuring charges of $11 million, or $0.06 per share, related to employee separation costs, asset write-downs and facility closures, an after-tax gain of $9 million, or $0.05 per share, from a sale of corporate real estate, and an after-tax gain of $6 million, or $0.04 per share, from the recognition of a curtailment gain associated with the company's U.S. pension plan.

Sales from continuing operations were $1.43 billion for the three months ended June 30, 2009 compared to $1.71 billion for the three months ended June 30, 2008. Sales from continuing operations were $2.79 billion for the six months ended June 30, 2009 compared to $3.23 billion for the six months ended June 30, 2008. Lower sales reflect reduced overall demand for packaged goods, office supplies and pine chemicals due to weak global economic conditions. While overall volumes declined, volumes were higher in several targeted markets within MWV's global packaging strategy including beverage paperboard, home and garden and healthcare solutions. Cash flow from operations increased to $266 million for the six months ended June 30, 2009 from $155 million for the six months ended June 30, 2008, reflecting the receipt of alternative fuel mixture credits and increased cash flow from the company's land management business, as well as from improved working capital usage.

MWV is continuing to implement a series of broad cost reduction actions to strengthen the company's financial position and improve its operational effectiveness. These actions include productivity initiatives at all facilities, aggressive sourcing strategies, restructuring the company's manufacturing footprint and significant reductions in overhead costs. By the end of 2009, these actions are expected to result in the elimination of 2,000 positions, or 10% of MWV's global workforce, and the closure or restructure of 12 to 14 manufacturing facilities by the end of 2009. These cost management efforts are designed to achieve $125 million in pre-tax savings in 2009, with a targeted run-rate range of $250 million to $300 million by mid-2010. In the second quarter of 2009, the company realized savings of $32 million ($46 million year-to-date) toward these goals, including the closure or restructure of four manufacturing facilities (12 year-to-date). As a result of its progress to date, the company now expects to exceed its initial 2009 savings target of $125 million by at least 10%.

Alternative fuel mixture credit

The U.S. Internal Revenue Code allows an excise tax credit for alternative fuel mixtures produced by a taxpayer for sale, or for use as a fuel in a taxpayer's trade or business. MWV qualifies for the alternative fuel mixture credit because it uses an alternative fuel known as black liquor, which is a byproduct of its wood pulping process to power its paperboard mills. In April 2009, the company was notified that its registration as an alternative fuel mixer was approved by the Internal Revenue Service. Following receipt of certification by the Internal Revenue Service, the company submitted refund claims totaling $180 million ($178 million after associated expenses) based on fuel usage at its three U.S. paperboard mills from mid-January 2009 to June 30, 2009, and received cash totaling $134 million through the end of the second quarter. The credit is currently scheduled to expire on December 31, 2009. The pre-tax impact of the excise credit, net of associated expenses, is included in other income in the consolidated statement of operations in the amount of $178 million for the three months ended June 30, 2009, and is included in Corporate and Other for segment reporting purposes.

RESULTS OF OPERATIONS

Presented below are results for the three and six months ended June 30, 2009 and
2008 reported in accordance with accounting principles generally accepted in the
U.S. All per share amounts are presented on an after-tax basis.



                                                     Three Months Ended           Six Months Ended
                                                          June 30,                    June 30,
In millions, except per share amounts                2009           2008          2009         2008
Net sales                                          $   1,432       $ 1,709      $  2,786      $ 3,227

Cost of sales                                          1,202         1,406         2,396        2,699
Selling, general and administrative expenses             196           202           403          403
Interest expense                                          51            49           103          103
Other income, net                                       (185 )         (21 )        (193 )        (28 )


Income from continuing operations before income
taxes                                                    168            73            77           50

Income tax provision                                      43            15            31           -


Income from continuing operations                        125            58            46           50

(Loss) income from discontinued operations, net
of income taxes                                           -             (2 )          -             2


Net income attributable to the company             $     125       $    56      $     46      $    52


Net income per share-basic and diluted:
Income from continuing operations                  $    0.72       $  0.34      $   0.27      $  0.29
(Loss) income from discontinued operations                -          (0.01 )          -          0.01

Net income attributable to the company             $    0.72       $  0.33      $   0.27      $  0.30

Sales were $1.43 billion for the three months ended June 30, 2009 compared to $1.71 billion for the three months ended June 30, 2008. Sales were $2.79 billion for the six months ended June 30, 2009 compared to $3.23 billion for the six months ended June 30, 2008. During 2009, the benefits of improved pricing and product mix were more than offset by lower volume and the impact of unfavorable foreign currency exchange compared to 2008. Refer to the individual segment discussions below for detailed sales information for each segment.

Cost of sales was $1.20 billion for the three months ended June 30, 2009 compared to $1.41 billion for the three months ended June 30, 2008. Cost of sales was $2.40 billion for the six months ended June 30, 2009 compared to $2.70 billion for the six months ended June 30, 2008. Decreased cost of sales was primarily due to lower sales volume, the impact of foreign currency exchange, input cost deflation, and productivity initiatives and overhead reduction actions. Input costs, including energy, raw materials and freight, were $23 million and $12 million lower during the three and six months ended June 30, 2009, respectively, compared to the same periods in 2008. The results for 2009 reflect higher restructuring charges of $26 million and $88 million for the three and six months ended June 30, 2009, respectively, compared to the same periods in 2008.

Selling, general and administrative expenses were $196 million for the three months ended June 30, 2009 compared to $202 million for the three months ended June 30, 2008. Selling, general and administrative expenses were $403 million for both the six months ended June 30, 2009 and 2008. In 2009, the benefits from productivity initiatives and overhead reduction actions and the impact of foreign currency exchange more than offset higher restructuring charges and other costs compared to 2008. The results for 2009 reflect higher restructuring charges of $5 million and $17 million for the three and six months ended June 30, 2009, respectively, compared to the same periods in 2008.

Pension income was $14 million for the three months ended June 30, 2009 compared to $22 million for the three months ended June 30, 2008. Pension income was $29 million for the six months ended June 30, 2009 compared to $43 million for the six months ended June 30, 2008. Pension income is reported in Corporate and Other for segment reporting purposes.

Other income, net is comprised of the following for the three and six months ended June 30, 2009 and 2008:

                                                       Three months ended           Six months ended
                                                            June 30,                    June 30,
In millions                                            2009            2008         2009          2008
Gains on asset sales, net                            $      -         $  (13 )    $      -        $ (13 )
Interest income                                             (5 )          (9 )          (10 )       (18 )
Foreign currency exchange (gains) losses                    (1 )           1             -            2
Alternative fuel mixture credit                           (178 )          -            (178 )        -
Other                                                       (1 )          -              (5 )         1

                                                     $    (185 )      $  (21 )    $    (193 )     $ (28 )

Interest expense was $51 million for the three months ended June 30, 2009 and was comprised of $42 million related to bond and bank debt, $1 million related to a long-term obligation non-recourse to MWV, $4 million related to borrowings on insurance polices and $4 million related to other items. Interest expense was $49 million for the three months ended June 30, 2008 and was comprised of $37 million related to bond and bank debt, $3 million related to a long-term obligation non-recourse to MWV, $4 million related to borrowings on insurance polices and $5 million related to other items. Interest expense was $103 million for the six months ended June 30, 2009 and was comprised of $84 million related to bond and bank debt, $3 million related to a long-term obligation non-recourse to MWV, $9 million related to borrowings on insurance polices and $7 million related to other items. Interest expense was $103 million for the six months ended June 30, 2008 and was comprised of $79 million related to bond and bank debt, $7 million related to a long-term obligation non-recourse to MWV, $8 million related to borrowings on insurance polices and $9 million related to other items.

For the three and six months ended June 30, 2009, the effective tax rates attributable to continuing operations were approximately 26% and 40%, respectively. For the three and six months ended June 30, 2008, the effective tax rates attributable to continuing operations were approximately 20% and -0-%, respectively. The differences in the effective tax rates compared to statutory rates were primarily the result of changes to the mix of expected income levels between the company's domestic and foreign operations, and discrete items including favorable tax settlements in 2008. The annual effective rate for 2009 is expected to be about 30%, excluding discrete items.

On July 1, 2008, the company completed the sale of its North Charleston, South Carolina kraft paper mill and related assets (collectively, the "Kraft business") for net cash proceeds of $466 million. For the three and six months ended June 30, 2008, the after-tax operating results of the Kraft business are being reported as discontinued operations in the consolidated statements of operations. The results of operations and assets and liabilities of the Kraft business were previously included in the Packaging Resources segment. Loss from discontinued operations was $2 million, or $0.01 per share, for the three months ended June 30, 2008, and income from discontinued operations was $2 million, or $0.01 per share, for the six months ended June 30, 2008. Refer to Note 13 of Notes to Consolidated Financial Statements for further discussion of the sale of the Kraft business and discontinued operations treatment.

In addition to the information discussed above, the following sections discuss the results of operations for each of the company's business segments and Corporate and Other. MWV's business segments are (i) Packaging Resources, (ii) Consumer Solutions, (iii) Consumer & Office Products, (iv) Specialty Chemicals, and (v) Community Development and Land Management. Refer to Note 10 of Notes to Consolidated Financial Statements for a reconciliation of the sum of the results of the business segments and Corporate and Other to the company's consolidated income from continuing operations before income taxes. Restructuring charges are included in Corporate and Other for segment reporting purposes. Refer to the discussion included in "Significant Transactions" herein below for restructuring charges attributable to the company's business segments.

Packaging Resources



                                                       Three months ended           Six months ended
                                                            June 30,                    June 30,
In millions                                            2009         2008          2009           2008
Sales                                                $     614    $     674      $ 1,182      $    1,305
Segment profit (1)                                          49           54           68              86

(1) Segment profit is measured as results before restructuring charges, pension income, interest expense and income, income taxes, non-controlling interest income and losses, and discontinued operations.

The Packaging Resources segment produces bleached paperboard ("SBS"), Coated Natural Kraft® paperboard ("CNK") and linerboard. This segment's paperboard products are manufactured at three mills located in the U.S. and two mills located in Brazil. SBS is used for packaging high-value consumer products such as pharmaceuticals, personal and beauty care, cosmetics, tobacco, food service and aseptic cartons. CNK paperboard is used for a range of packaging applications, the largest of which for MWV is multi-pack beverage packaging. Linerboard is used in the manufacture of corrugated boxes and other containers.

Sales for the Packaging Resources segment were $614 million for the three months ended June 30, 2009 compared to $674 million for the three months ended June 30, 2008. Sales declined compared to the prior year due to weaker demand for the majority of the segment's paperboard grades and from the impact of unfavorable foreign currency exchange. Shipments of SBS in 2009 were 337,000 tons, down 19% from 2008, driven by lower volumes in global general packaging and commercial print markets. Shipments of CNK in 2009 were 278,000 tons, down 5% from 2008, reflecting lower demand in global general packaging in response to the weak global economy. In 2009, SBS prices were up 7% and CNK prices were up 6% compared to 2008. Backlogs for both bleached paperboard and coated unbleached kraft paperboard currently remain about three weeks. Sales of the company's Brazilian packaging operation, Rigesa Ltda., were 26% lower in 2009, driven primarily by the impact of unfavorable foreign currency exchange and lower volume compared to 2008.

Profit for the Packaging Resources segment was $49 million for the three months ended June 30, 2009 compared to $54 million for the three months ended June 30, 2008. Profit in 2009 was negatively impacted by $32 million from higher unabsorbed fixed manufacturing costs due to market- and maintenance-related downtime, $10 million from lower sales volume and $9 million from unfavorable foreign currency exchange compared to 2008. Profit in 2009 benefited by $26 million from improved pricing and product mix, $11 million from input cost deflation and $9 million from productivity initiatives and overhead reduction actions compared to 2008. During 2009, the segment took aggressive action to match production with demand in addition to its planned maintenance outages resulting in lower production volumes. During the three months ended June 30, 2009, market- and maintenance-related downtime totaled 103,000 tons (88,000 SBS and 15,000 CNK). Shipment declines in paperboard grades for tobacco, beverage and general packaging were modest, while declines in more economically-sensitive grades for commercial print and global general packaging markets were higher.

Sales for the Packaging Resources segment were $1.18 billion for the six months ended June 30, 2009 compared to $1.31 billion for the six months ended June 30, 2008. Sales declined compared to the prior year due to weaker demand for all of the segment's paperboard grades and from the impact of unfavorable foreign currency exchange. Shipments of SBS in 2009 were 658,000 tons, down 18% from 2008, driven by lower volumes in global general packaging and commercial print markets. Shipments of CNK in 2009 were 518,000 tons, down 8% from 2008, reflecting lower demand in global general packaging and beverage packaging in response to the weak global economy. In 2009, SBS prices were up 7% and CNK prices were up 6 % compared to 2008. Sales of the company's Brazilian packaging operation, Rigesa Ltda., were 27% lower in 2009, driven primarily by the impact of unfavorable foreign currency exchange compared to 2008.

Profit for the Packaging Resources segment was $68 million for the six months ended June 30, 2009 compared to $86 million for the six months ended June 30, 2008. Profit in 2009 was negatively affected by $61 million from higher unabsorbed fixed manufacturing costs due to market- and maintenance-related downtime, $19 million from lower sales volume, $18 million from the impact of unfavorable foreign currency exchange and $4 million from input cost inflation compared to 2008. Profit in 2009 benefited by $58 million from improved pricing and product mix and $26 million from productivity initiatives and overhead reduction actions compared to 2008. During the six months ended June 30, 2009, market- and maintenance-related downtime totaled 189,000 tons (122,000 SBS and 67,000 CNK). Shipment declines in paperboard grades for tobacco and liquid packaging were modest, while declines in more economically-sensitive grades for commercial print and global general packaging markets were steeper.

During the third quarter of 2009 and in connection with the 2008 strategic cost management initiative, the company made the decision to permanently shut down a paperboard machine at its Evadale, Texas mill, removing approximately 200,000 tons of annual SBS paperboard capacity. The company's remaining annual SBS capacity will be approximately 1.5 million tons. This action will result in estimated pre-tax restructuring charges of about $40 million related to asset write-downs and employee separation costs, the majority of which will be non-cash and recorded in the third quarter of 2009.

Consumer Solutions



                                                               Three months ended                       Six months ended
                                                                    June 30,                                June 30,
In millions                                                2009                   2008                2009               2008
Sales                                                 $          554         $          656      $         1,087      $    1,262
Segment profit (1)                                                25                     22                   38              31

(1)   Segment profit is measured as results before restructuring charges, pension income, interest expense and income, income
taxes and non-controlling interest income and losses.

The Consumer Solutions segment offers a full range of converting and consumer packaging solutions including printed plastic packaging and injection-molded products used for personal and beauty care, cosmetics and pharmaceutical products; dispensing and sprayer systems for personal and beauty care, healthcare, fragrance and home and garden markets; and packaging for media products such as DVDs, CDs, video games and software. This segment designs and produces multi-pack cartons and packaging systems primarily for the global beverage take-home market and packaging for the global tobacco market. Paperboard and plastic are converted into packaging products at plants located in North America, South America, Europe and Asia. This segment also has pharmaceutical packaging contracts with retailers, including well-known mass-merchants. In addition, this segment manufactures equipment that is leased or sold to its beverage and dairy customers to package their products.

Sales for the Consumer Solutions segment were $554 million for the three months ended June 30, 2009 compared to $656 million for the three months ended June 30, 2008. During 2009, global healthcare packaging sales growth driven by the continued success of MWV's Shellpak® solution was more than offset by the impact of unfavorable foreign currency exchange, modest sales declines in global beverage, tobacco, and home and garden, and more pronounced sales declines in the discretionary markets of global personal care and media packaging compared to 2008.

Profit for the Consumer Solutions segment was $25 million for the three months ended June 30, 2009 compared to $22 million for the three months ended June 30, 2008. As a result of the segment's productivity initiatives and overhead cost reductions, which included the announced closure of two manufacturing facilities during the second quarter of 2009, profit in 2009 benefited by $20 million from improved net cost productivity compared to 2008. Profit in 2009 was negatively impacted by $8 million from lower sales volume, $5 million from the impact of unfavorable foreign currency exchange, $3 million from unfavorable pricing and product mix and $1 million from input cost inflation compared to 2008.

Sales for the Consumer Solutions segment were $1.09 billion for the six months ended June 30, 2009 compared to $1.26 billion for the six months ended June 30, 2008. During 2009, global healthcare packaging sales growth driven by the continued success of MWV's Shellpak ® solution was more than offset by the impact of unfavorable foreign currency exchange, modest sales declines in global beverage, tobacco, and home and garden, and more pronounced sales declines in the discretionary markets of global personal care and media packaging compared to 2008.

Profit for the Consumer Solutions segment was $38 million for the six months ended June 30, 2009 compared to $31 million for the six months ended June 30, 2008. As a result of the segment's productivity initiatives and overhead cost reductions, which included the announced closure or restructure of 12 manufacturing facilities during the first half of 2009, profit in 2009 benefited by $43 million from improved net cost productivity compared to 2008. Profit also benefited by $1 million from input cost deflation compared to 2008. Profit in 2009 was negatively impacted by $14 million from the impact of unfavorable foreign currency exchange, $13 million from unfavorable pricing and product mix and $10 million from lower sales volume compared to 2008.

Consumer & Office Products



                                                               Three months ended                          Six months ended
                                                                    June 30,                                   June 30,
In millions                                                2009                   2008                2009                   2008
Sales                                                 $          234         $          270      $          397         $          478
Segment profit (1)                                                31                     27                  26                     24

(1)   Segment profit is measured as results before restructuring charges, pension income, interest expense and income, income taxes
and non-controlling interest income and losses.

The Consumer & Office Products segment manufactures, sources, markets and distributes school and office products, time-management products and envelopes in North America and Brazil through both retail and commercial channels. MWV produces many of the leading brand names in school supplies, time-management and commercial office products, including AMCAL, ® AT-A-GLANCE, ® Cambridge, ® COLUMBIAN, ® Day Runner, ® Five Star, ® Mead ® and Trapper Keeper. ®

Sales for the Consumer & Office Products segment were $234 million for the three . . .