By Susan Kelly February 10, 2005 -- International Paper (NYSE: IP) today reported fourth-quarter 2004 earnings of $157 million, or $0.32 per share, compared with $35 million, or $0.08 per share basic, in the fourth quarter of 2003. For the full-year 2004, International Paper reported earnings of $478 million, or $0.98 per share, compared with $294 million, or $0.62 per share, in 2003 Fourth quarter 2004 sales rose to $6.6 billion from $6.1 billion in the fourth quarter of 2003, and compared with $6.6 billion in the third quarter of 2004. For the full-year 2004, net sales were $25.5 billion compared with 2003 net sales of $24.0 billion. Topic of this summary: Chairman Comments Business Segment Performance Developments Outlook Q & A Chairman Comments "Throughout 2004, we experienced healthy business conditions with solid volume and improving average price realizations," said John Faraci, International Paper chairman and chief executive officer. "However, margins and earnings were impacted by dramatically rising raw material costs and lower wood products pricing, particularly in the last quarter." Business Segment Performance Printing Papers Fourth-quarter operating profits for Printing Papers were $196 million compared with third-quarter operating profits of $160 million as a result of the company experiencing higher average pricing for uncoated free sheet and coated paper in the United States . This was somewhat offset by weaker average pulp pricing and higher input costs. Packaging Industrial and Consumer Packaging operating profits were $170 million in the fourth quarter, compared with $183 million in the third quarter, as higher average pricing across International Paper's containerboard, corrugated box and bleached board businesses was offset by higher input costs and seasonally lower volumes in Industrial Packaging, maintenance downtime in containerboard and weaker operational performance. Box shipments grew 9% in 2004 excluding Box USA plants volume. Box USA integration is almost complete and is on track to achieve target EBITDA run rate of $80 million. The company's distribution business, xpedx, reported operating profits of $22 million for the fourth quarter compared with operating profits in the third quarter of $27 million, due to seasonally weaker business conditions. Wood Products Fourth-quarter Forest Products operating profits were $176 million, compared with earnings of $191 million in the third quarter primarily as lower average IP wood products price realizations combined with seasonally slower volumes more than offset $20 million of higher income from land and real estate sales. Operating profits at Carter Holt Harvey, International Paper's 50.5% owned subsidiary in New Zealand , were $12 million in the fourth quarter, compared with third-quarter operating profits of $17 million as a result of facility reorganization costs. Outlook Commenting on the first quarter of 2005, Faraci said, "Going into February, we are seeing demand starting to improve. After a slow month in January, our order activity is picking up, and our average price realizations are moving up on coated paper, some grades of printing papers, bleached board and pulp. However, our profit margins and earnings will be under pressure as the raw material cost environment continues to be severe. We expect higher benefit-related costs, and the investment we are making to improve our supply chain will be somewhat higher this quarter." The company also said it will continue to strengthen its balance sheet through the repayment of debt. For example, by the end of January 2005, the company had used the proceeds from the divestitures of Weldwood of Canada and the Maine and New Hampshire forestlands to repay approximately $1.3 billion in debt. Q & A IP is happy with the run rate for 2004 which is back on track for their volume. Costs that they can control they have contributed around $800 million which is hitting the targets they were looking for. Input cost mix was questioned on the controllable elements to meet the earlier promised three year run rate. IP cited 2003 was a year that had energy costs, general inflation environment, and demand issues that were not calculated in their initial input costs. IP does not feel they are that far off with the 9% at this time. Referred to last year’s forest review which was provided IP in the Appendices of the Earnings call presentation. Pension contribution is expected to be zero this year. No board inefficiencies should not recur in the first quarter Weaker dollar does not impact greatly as they budget everything in U.S. dollars. Will there be a price increase in the spring? IP responded that supply and demand looks solid for 2005 and IP has initiated one price increase as of January 1 st and they are getting it. No comments otherwise. Uncoated free sheet business is expected to be slow growth but varies by segment and is channel specific. Commercial printing was very weak at the beginning in the first two quarters of 2004 but during the last half commercial printing has been much healthier. Some contracts have annual cost pass through but IP believes they know where they are on pricing. They are not rolling over or agreeing to cap any prices which don’t reflect the outlook of the marketplace. IP actually sees a pricing upside opportunity.