Memphis, Tenn. - International Paper today reported a preliminary first-quarter 2010 net loss attributable to common shareholders totaling $162 million ($0.38 per share) compared with a loss of $101 million ($0.24 per share) in the fourth quarter of 2009 and net earnings of $257 million ($0.61 per share) in the first quarter of 2009. Amounts in all periods include special items.

Earnings before special items in the 2010 first quarter totaled $16 million ($0.04 per share), compared with $101 million ($0.24 per share) in the fourth quarter of 2009 and $34 million ($0.08 per share) in the first quarter of 2009. 

Quarterly net sales were $5.8 billion compared with $6.0 billion in the fourth quarter of 2009 and $5.7 billion reported in the first quarter of 2009.

Operating profits in the first quarter were $20 million, up from an operating loss of $147 million in the fourth quarter of 2009. Both amounts reflect the inclusion of special items.

"We started the quarter with an extreme run up in fiber costs in North America but ended with costs peaking in March and now moderating," said John Faraci, chairman and chief executive officer. "The strong results of our European businesses helped offset higher input costs in North America. Importantly, we exited the quarter in North America seeing improved cost and fiber availability, stronger operations, improving demand and the further realization of our previously announced price increases – setting us up for a significantly better second quarter."

Segment Information
To measure the performance of the company's business segments from quarter to quarter without variations caused by special items, management focuses on business segment operating profits excluding those items. First quarter 2010 segment operating profits and business trends compared with the prior quarter are as follows:

Industrial Packaging operating profits (excluding special items) decreased to $46 million as compared with $84 million in the fourth quarter of 2009. This decrease was due primarily to higher input costs and more annual maintenance outages. Results were positively impacted by lower operating costs and improved pricing late in the quarter. Operating profits after special items were $41 million in the first quarter of 2010 compared with a loss of $391 million in the fourth quarter of 2009.

Printing Papers had an operating profit (excluding special items) of $126 million as compared with $139 million in the fourth quarter of 2009. This decrease was due to higher input costs, and lower volumes particularly in Brazil and Europe.  Results were positively impacted by cost reductions, improved mix, stronger pulp pricing and improved paper pricing late in the quarter. Operating profits after special items were a loss of $78 million in the first quarter of 2010 compared with profits of $137 million in the fourth quarter of 2009.

Consumer Packaging had an operating profit (excluding special items) of $31 million compared with an operating profit of $49 million in the fourth quarter of 2009.  While results were positively impacted by lower mill outage costs, they were negatively offset by significantly higher input costs and unfavorable operations. Operating profits after special items were $28 million in the first quarter of 2010 compared with $63 million in the fourth quarter of 2009.

The company's distribution business, xpedx, reported operating profits (excluding special items) of $21 million, lower than the $31 million posted in the fourth quarter of 2009.  The 2009 fourth quarter earnings included a $17 million favorable inventory valuation adjustment.  Although the early part of the year experienced seasonally lower sales volume, savings from reduced headcount and decreased costs positively impacted the quarter. Operating profits after special items were $21 million in the first quarter of 2010 compared with $26 million in the fourth quarter of 2009.

Forest Products operating profits totaled $8 million, down from $18 million in the prior quarter due to fewer land sales. The company has approximately 200,000 acres of land remaining for sale, primarily composed of smaller retail and larger transitional tracts. There were no special items recorded in either quarter.

Net corporate expenses totaled $51 million for the 2010 first quarter compared with $40 million in the 2009 fourth quarter and $51 million in the first quarter of 2009.  Pension expense is slightly higher in 2010 compared with 2009.

Effective Tax Rate
The effective tax rate before special items for the first quarter of 2010 was 32 percent, compared with 22 percent in the fourth quarter of 2009.  The tax rate in the fourth quarter of 2009 is lower because of the inclusion of non-U.S. tax incentives and adjustments of tax estimates upon the filing of the company's 2008 non-U.S. income tax returns. 

Effects Of Special Items
Special items in the first quarter of 2010 included a pre-tax charge of $215 million ($132 million after taxes) for restructuring and other charges and a $46 million after-tax expense to reduce deferred tax assets  related to incentive compensation ($14 million) and post-retirement prescription drug coverage (Medicare Part D reimbursements) ($32 million).  Restructuring and other charges included a $204 million pre-tax charge ($124 million after taxes) associated with the closure of the Franklin mill (including $190 million of accelerated depreciation), a $4 million pre-tax charge ($2 million after taxes) for early debt extinguishment costs, a $3 million pre-tax charge ($2 million after taxes) associated with the reorganization of the Company's Shorewood operations, and charges of $4 million (before and after taxes) for other items. 

Special items in the fourth quarter of 2009 included a $516 million pre-tax credit ($469 million after taxes) for alternative fuel mixture credits earned under 2007 legislation enacted to provide a tax credit for companies that use alternative fuel mixtures to produce renewable energy to operate their businesses, a $15 million pre-tax charge ($10 million after taxes) for costs associated with the Industrial Packaging business integration, a pre-tax charge of $1.0 billion ($638 million after taxes) for restructuring and other charges, and an $11 million pre-tax charge ($8 million after taxes) for net losses on sales and impairments of businesses.  Restructuring and other charges included a pre-tax charge of $861 million ($525 million after taxes) for shutdown costs for the closures of the Albany, Franklin and Pineville mills announced in the fourth quarter of 2009; a pre-tax charge of $82 million ($50 million after taxes) for the shutdown of a paper machine at the Valliant mill; a pre-tax charge of $58 million ($35 million after taxes) for early debt extinguishment costs; a pre-tax charge of $23 million ($15 million after taxes) for severance and benefit costs associated with the company's 2008 overhead reduction program; a $9 million charge, before and after taxes, for severance and other costs associated with the planned closure of the Etienne mill in France; and pre-tax charges of $7 million ($4 million after taxes) for costs associated with the reorganizations of the company's Shorewood and xpedx operations.  Additionally, a $15 million income tax expense was recorded to write off a deferred tax asset for a recycling credit in the state of Louisiana.  The net after-tax effect of these special items is a loss of $202 million, or $0.48 per share.

Special items in the first quarter of 2009 included a credit of $540 million before taxes ($330 million after taxes) for alternative fuel mixture credits earned under 2007 legislation enacted to provide a tax credit for companies that use alternative fuel mixtures to produce energy to operate their businesses, a pre-tax charge of $36 million ($22 million after taxes) for costs related to the industrial packaging business integration, a pre-tax charge of $83 million ($65 million after taxes) for restructuring and other charges, and a $20 million after-tax charge for certain income tax adjustments. Restructuring and other charges included a $52 million pre-tax charge ($32 million after taxes) for severance and benefits associated with the company's 2008 overhead reduction program, a pre-tax charge of $23 million ($28 million after taxes) for closure costs for the Inverurie mill in Scotland, a $6 million pre-tax charge ($4 million after taxes) for facility closure costs in Franklin, Va., and a $2 million pre-tax charge ($1 million after taxes) for costs associated with the reorganization of the company's Shorewood operations.