ATLANTA, July 29 -- Georgia-Pacific Corp. today reported second quarter 2004 income from continuing operations of $230 million (88 cents diluted earnings per share) compared with income from continuing operations of $54 million (22 cents diluted earnings per share) in second quarter 2003. Income from continuing operations excludes the results of the non- integrated pulp operations sold during the quarter and the related loss on the sale. Income from continuing operations includes results from the building products distribution business, which was sold May 7, and the related gain on that sale. Second quarter 2004 net income excluding unusual items was $239 million (91 cents diluted earnings per share). Unusual items included a gain of $60 million ($13 million after tax, or 5 cents diluted earnings per share) on non- strategic asset sales, a $27 million charge ($17 million after tax, or 6 cents diluted loss per share) for the early extinguishment of debt, a $24 million charge ($15 million after tax, or 6 cents diluted loss per share) for asset impairment and restructuring primarily related to the Bellingham, Wash., site held for sale under a letter of intent with the Port of Bellingham, and severance and restructuring costs at the Green Bay (Broadway) facility in Wisconsin and the south San Francisco, Calif., facility. In addition, second quarter 2004 results include a pretax charge of $36 million ($23 million after tax or 9 cents diluted loss per share) related to the expensing of stock-based compensation. Second quarter 2003 net income excluding unusual items was $63 million (25 cents diluted earnings per share). Unusual items included a $22 million pretax charge ($13 million after tax or 5 cents diluted loss per share) for asset impairment and restructuring and a pretax gain of $18 million ($11 million after tax or 4 cents diluted earnings per share) on the sale of certain packaging assets. "We are pleased with our second quarter results and with the continuing execution by our businesses on our commitments to shareholders and customers," said A.D. "Pete" Correll, Georgia-Pacific chairman and chief executive officer. "Our building products business, which set a new quarterly profit record, remains robust and we see consistent signs that our consumer products business strategy is working. Through the balance of the year, we are optimistic that favorable trends in our paper businesses will further strengthen, while our building products business will remain on solid footing." Georgia-Pacific's net sales were $5.2 billion for the second quarter 2004, up 6 percent compared with $4.9 billion for the second quarter 2003. Net sales for 2004 and 2003 exclude results from the non-integrated pulp facilities, which are reported as Discontinued Operations in all periods. Sales of the building products distribution segment are included up to the date of sale on May 7, and totaled $622 million for the partial second quarter 2004 and $1 billion for the full second quarter 2003. Proceeds from the asset sales and operating cash flow were used to reduce debt by $1.6 billion. Net debt was $9.2 billion at the end of the second quarter. "We remain on track with our financial strategy of restoring financial flexibility by reducing our debt and improving our ratios to investment-grade levels, as evidenced by our recent completion of a new bank credit facility with near investment-grade terms," Correll said. For the first six months of 2004, Georgia-Pacific reported income from continuing operations of $372 million ($1.42 diluted earnings per share), compared with $3 million (1 cent diluted earnings per share) in the same period of 2003. Both periods exclude results of the non-integrated pulp operations that have been sold. For the first six months of 2004, the company reported net income excluding unusual items of $402 million ($1.53 diluted earnings per share), compared with $58 million (23 cents diluted earnings per share) in the same period of 2003. Net sales for the first six months of 2004 were $10.4 billion, compared with $9.3 billion in the same period a year ago, excluding sales from Discontinued Operations. North America Consumer Products The North America consumer products segment includes the company's retail and away-from-home tissue businesses. Familiar consumer tissue brands include Quilted Northern, Angel Soft, Brawny, Sparkle, Soft 'n Gentle, Mardi Gras, So-Dri, Green Forest and Vanity Fair, as well as the Dixie brand of disposable cups, plates, containers and cutlery. The segment recorded second quarter 2004 operating profit of $148 million versus $147 million in second quarter 2003. Included in the second quarter 2004 results were pretax charges of $19 million for asset impairment and restructuring charges related primarily to the Bellingham property. Second quarter 2003 results included an $11 million pretax charge for asset impairments at Old Town, Maine. Overall tissue prices per ton increased 5 percent versus second quarter 2003, while Dixie prices improved 4 percent over the same period. Retail case shipment volumes grew 4 percent over a year ago, driven by branded tissue, branded towel and club products. "We're executing our strategy as evidenced by improved product quality and our increasing profitability. We continue to successfully implement launches of our new Quilted Northern and Brawny products," Correll said. "Retail pricing has improved primarily as a result of Quilted Northern and Brawny price appreciation behind the product upgrades. We feel confident about our progress and the outlook in the retail tissue and Dixie businesses. "Our away-from-home tissue shipment volumes were up versus first quarter 2004 and second quarter 2003. Overall, prices improved from first quarter 2004, but were down from a year ago. The away-from-home tissue business continues to experience increasing raw material and energy costs, and remains under competitive pressure," Correll said. International Consumer Products The international consumer products segment markets both retail and away- from-home products such as bathroom and facial tissue, handkerchiefs and paper towels, as well as tabletop products for foodservice in Europe and other locations. Market-leading brands include Lotus, Moltonel, Colhogar, Tenderly and Delica. The segment recorded a second quarter 2004 operating profit of $38 million, compared with $39 million during the same quarter a year ago. Changes in the currency exchange rate between the U.S. dollar and the Euro since the second quarter of 2003 benefited second quarter 2004 results by approximately $3 million. "In our international consumer products business, prices in Euros were flat and shipments were down from a year ago," Correll said. "Our branded products continue to be under pressure from private label products. We are addressing this aggressively by reducing our operating costs and by intensifying our focus on new product offerings and on innovation." Packaging Georgia-Pacific's packaging segment includes four containerboard manufacturing facilities and 57 converting operations. Its Color-Box subsidiary is the leading litho-laminated corrugated manufacturer in North America. The segment recorded an operating profit of $81 million in the second quarter 2004, compared with $100 million in the second quarter 2003. Second quarter 2004 results include a $23 million pretax gain on the sale of the San Francisco facility that was partially offset by asset impairment and pretax restructuring charges of $5 million. Second quarter 2003 results include an $18 million pretax gain on the sale of the Schenectady, N.Y., facility. "Our packaging business continues to excel in spite of higher raw material and energy costs. We continue to run at capacity at all of our mills. Prices in this business improved sequentially quarter over quarter for the first time in more than a year. Through June, we had realized nearly all of an initial $50 per ton containerboard price increase. We also have announced a second $50 a ton price increase and price increases on finished boxes and sheets, and expect to realize these increases by year's end. "Additionally, we have successfully integrated recent acquisitions in our Color-Box business and the two new plants in Georgia-Pacific's system are already showing profits," Correll said. Bleached Pulp and Paper The bleached pulp and paper segment is comprised of the company's bleached board and communication papers businesses, as well as its former non- integrated pulp operations, and its 40 percent minority ownership in Unisource. The segment recorded a second quarter 2004 operating profit of $27 million, compared with an operating loss of $1 million in the second quarter 2003. A $26 million pretax gain on the sale of our interest in three Brazilian companies that owned a minority, non-voting interest in a Brazilian pulp company Aracruz Celulose S.A., is included in the second quarter 2004 results. The segment's results in both years exclude the non-integrated pulp facilities at New Augusta, Miss., and Brunswick, Ga. Those operations are now reported as Discontinued Operations and had an after-tax loss of $10 million in the second quarter 2004. In the second quarter 2003, those operations recorded after-tax income of $7 million. "Prices and shipments rebounded from the first quarter across all grades; however, for communication papers, prices still remain well below year-ago levels. Capacity reductions and increased demand that occurred in the past year are resulting in lower industry inventories," Correll said. Building Products Manufacturing The building products manufacturing segment includes the company's structural panels, gypsum, lumber, industrial wood products and chemical manufacturing businesses. The segment recorded second quarter 2004 operating profit of $367 million versus an operating profit of $39 million in the second quarter 2003. The 2003 results include a pretax charge of $7 million for severance and asset impairments. "Prices were up substantially in all of our building products businesses compared to a year ago," Correll said. "Structural panels prices declined during June and are no longer at record levels, but remain solid and above prior-year levels. Panels prices began to stabilize at the beginning of the third quarter and we expect strong performance in this business for the rest of the year. "Our lumber business showed increased strength as did our gypsum business, and our industrial wood products business rebounded after our successful restructuring last year when we closed higher-cost facilities in our system." Building Products Distribution The building products distribution segment reported an operating profit of $40 million through May 7, 2004, compared with an operating profit of $21 million in the second quarter a year ago. On May 7, Georgia-Pacific finalized the previously announced sale of this segment to a new company owned by Cerberus Capital Management L.P., and members of the distribution business' management team. Georgia-Pacific also entered into a six-year agreement for the distribution business to continue purchasing structural panels, lumber and other building products manufactured by Georgia-Pacific. Other The company's Other segment primarily includes unallocated corporate expenses and the elimination of intersegment sales. The segment reported second quarter 2004 expenses of $144 million, compared with expenses of $64 million for the same period in 2003. Included in the second quarter 2004 results was an unusual $27 million pretax charge for the early extinguishment of debt. Also included in the results were a $36 million pretax charge for stock-based compensation expenses (versus a $6 million charge a year ago), as well as higher variable compensation expenses related to the company's improved financial performance and net foreign currency transaction losses associated with foreign borrowings. "During the second half of the year, we expect to fully realize previously announced price increases across our paper businesses, which should result in continued improvement in those segments. With ongoing strong demand for housing, our building products business should remain solid. We also are pleased with early indications of a rebound in commercial and industrial construction," Correll said. "The improving fundamentals in our businesses, combined with our continued vigilance in cost containment, capital investment and manufacturing discipline, make the outlook for the rest of 2004 encouraging."