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International Paper Q3: Higher Profit in Printing Papers, xpedx Earns $23 Million

Thursday, October 24, 2002

Press release from the issuing company

STAMFORD, Conn., Oct. 23 -- International Paper today reported 2002 third-quarter net earnings of $145 million ($0.30 per share), compared with a net loss of $275 million ($0.57 per share) in the third quarter 2001 and net earnings of $215 million ($0.45 per share) in the second quarter 2002. Third-quarter net sales were $6.4 billion compared with $6.5 billion for the same period in 2001 and $6.3 billion in the second quarter of 2002. Before special items, earnings for the 2002 third quarter were $153 million ($0.32 per share), compared with 2001 third-quarter earnings before special items of $68 million ($0.14 per share) and second-quarter 2002 earnings before special items of $169 million ($0.35 per share). "Despite a mixed third-quarter business environment, our third-quarter earnings are significantly higher than last year's levels," said John Dillon, International Paper chairman and chief executive officer. "Profits are up versus last year for three straight quarters, demonstrating the ongoing success of our internal programs and focus on our cost structure. We are well positioned for future earnings growth when the economy shows more consistent, broad based improvement." As in the first and second quarters of 2002, third-quarter results reflect the elimination of goodwill amortization effective January 1, 2002, resulting in an increase of $0.09 per share in the third quarter ($0.28 per share for the nine months ended Sept. 30) compared with 2001 results. Special items in the quarter consisted of a pre-tax charge of $10 million ($4 million after taxes and minority interest) for business realignment severance costs, a pre-tax charge of $9 million ($5 million after taxes and minority interest) for asset impairment charges, and a net $3 million gain before taxes ($1 million after taxes) related to adjustments of gains (losses) of businesses previously sold. Third-quarter 2001 special items included a net gain of $47 million before taxes (net loss of $2 million after taxes) related to disposition and impairment losses on assets of businesses held for sale, and charges in the amount of $481 million before taxes ($341 million after taxes) in connection with facility and business rationalizations and an increase in litigation related reserves. Special items in the second quarter of 2002 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. The company estimates that the impact on our defined benefit pension plans of the sharp decline in the stock market and lower interest rates will result in a reduction in shareholders' equity of about $1.5 billion at year-end. This adjustment is required by U.S. GAAP when the accrued pension liability exceeds the market value of plan assets. The exact amount of the reduction will depend on year-end plan asset values and interest rates. However, cash flow will not be impacted this year. In addition, a recently completed funding study indicates that the probability of required cash contributions to the plan over the next several years is low. Segment Information Compared with third quarter 2001, operating profit was higher as volumes improved in Printing Papers in North America and containerboard and as non-price initiatives continued to improve results. Third-quarter 2002 segment earnings and business trends compared with second quarter 2002 are as follows. Third-quarter earnings for Printing Papers were $180 million, up from second-quarter 2002 earnings of $106 million, due to higher volumes in North America and strong manufacturing performance both in North America and Europe. Industrial and Consumer Packaging earnings were $128 million in the third quarter, compared with $145 million in the second quarter. Although container pricing increased late in the quarter, average price realization for the full quarter was lower and offset improved volume and pricing in containerboard and kraft. Segment results were also lower due to start-up costs associated with a machine upgrade in bleached board. Earnings in the company's distribution business, xpedx, were $23 million for the third quarter of 2002, the same as in the second quarter as the business continued its focus on internal cost controls. Third-quarter Forest Products earnings were $164 million compared with $204 million in the second quarter primarily due to lower wood products prices and the favorable impact in the second quarter of $18 million from the reversal of previously accrued countervailing and anti-dumping duties on the company's Weldwood operations in Canada. Earnings at Carter Holt Harvey, International Paper's 50.5 percent owned subsidiary in New Zealand, rose slightly to $16 million in the third quarter compared with second-quarter earnings of $14 million as continued strength in the Australian and New Zealand housing markets offset seasonally reduced harvest volumes. Corporate expenses, net, increased from $37 million in the second quarter of 2002 to $71 million in the third quarter due primarily to lower foreign exchange gains, a decrease in pension income and an increase in benefit-related expenses.

 

 

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