International Paper Reports Solid Q2: xpedx Sales Up by $40 Million Versus Q1
Friday, July 19, 2002
STAMFORD, Conn., July 18 -- International Paper today reported 2002 second-quarter net earnings of $215 million ($0.45 per share), compared with a net loss of $313 million ($0.65 per share) in the second quarter 2001 and net earnings of $65 million ($0.13 per share) in the first quarter 2002. Second-quarter net sales were $6.3 billion compared with $6.7 billion for the same period in 2001 and $6 billion in the first quarter of 2002. Before special items, earnings for the 2002-second quarter were $169 million ($0.35 per share), compared with 2001 second-quarter earnings before special items of $64 million ($0.13 per share) and first-quarter 2002 earnings before special items of $58 million ($0.12 per share). "Our second-quarter performance was positively impacted by the continuing success of our cost reduction efforts," said John Dillon, International Paper chairman and chief executive officer. "Compared to last year's second quarter, volume is relatively flat, while pricing is down substantially. It's a significant achievement that we offset this price erosion by running well ahead of our targeted cost improvement goals for this year and by operating our manufacturing facilities extremely well. "The timing of the economic recovery remains uncertain," Dillon said. "We didn't see any meaningful impact from it on our sales volumes and revenues this quarter. So, I am very pleased with what we have been able to accomplish by focusing on those factors we can control." As in the 2002 first quarter, second-quarter results reflect the elimination of goodwill amortization effective January 1, 2002, resulting in an increase of $0.09 per share in the second quarter ($0.19 per share for the first six months) compared with 2001 results. This favorable effect was partially offset by a reduction in pension income, primarily due to a lower return on assets, that reduced second-quarter earnings by approximately $0.01 per share ($0.04 per share for the first six months), compared with 2001 results. Special items in the quarter consisted of a pre-tax charge of $79 million ($50 million after taxes) for facility closures, administrative realignment and related severance costs, and a net $28 million gain before taxes and minority interest ($96 million after taxes and minority interest) related to sales and expenses of businesses held for sale. Second-quarter 2001 special items included charges for facility closures, administrative realignment and related severance ($465 million before taxes and minority interest), impairment losses on assets of businesses held for sale ($85 million before taxes), and additional Champion merger integration costs ($32 million before taxes). Special items in the first quarter 2002 consisted of a $10 million pre-tax credit ($7 million after taxes) for the reversal of reserves no longer required. Segment Information Compared with second quarter 2001, operating profit was higher as ongoing cost improvement initiatives continued to favorably impact results. Second-quarter 2002 segment earnings and business trends compared with first quarter 2002 are as follows. Second-quarter earnings for Printing Papers were $106 million, up from first-quarter 2002 earnings of $76 million, primarily as a result of operations improvements. Industrial and Consumer Packaging earnings were $145 million in the second quarter, up from $128 million in the first quarter. Demand for bleached board and containerboard increased in the second quarter versus the first quarter, but remains weak compared to prior year levels. Earnings in the company's distribution business, xpedx, were $23 million for the second quarter 2002 compared with $18 million in the first quarter, due to continuing internal cost reduction programs. Sales increased by $40 million or 2.6 percent compared with the first quarter. Second-quarter Forest Products earnings of $204 million were up from $176 million in the first quarter due to higher lumber prices in the United States and stronger shipments from the Canadian lumber operations. In addition, the company realized an $18 million favorable impact from the reversal of previously accrued countervailing and anti-dumping duties on the Weldwood operations. Earnings at Carter Holt Harvey, International Paper's 50.5 percent owned subsidiary in New Zealand, rose slightly to $14 million in the second quarter compared with first-quarter earnings of $10 million. Strong demand in packaging and for wood products in the New Zealand and Australian markets offset weak export prices for pulp and linerboard.