International Paper Reports 3Q Results, Earnings Fall 74%
Press release from the issuing company
STAMFORD, Conn., Oct. 17-- International Paper today reported third-quarter 2001 earnings of $68 million ($0.14 per share) before special items, compared with $260 million ($0.53 per share) in the third quarter 2000 and $64 million ($0.13 per share) in the second quarter 2001. All figures are before special and extraordinary items.
"International Paper continues to take measures that strengthen our company -- focusing on our core businesses, improving our operational performance, working to manage our capacity and aggressively pursuing divestitures,'' said John Dillon, International Paper chairman and chief executive officer. "The programs we have in place are positively impacting our earnings.
"There is no doubt, however, that the tragic events of September 11 have placed additional stresses on consumer confidence in an already weak economy,'' said Dillon. "Like many other companies, we experienced business interruptions during the week of the terrorist attacks. The long-term impact on our company resulting from those events is still undetermined.''
Special items in the third quarter 2001 earnings statement include a gain of $215 million before taxes on the sale of the Curtis/Palmer hydroelectric facility and charges in the amount of $649 million before taxes in connection with facility and business rationalizations, an increase in litigation related reserves, and disposition and impairment losses on assets of businesses held for sale.
After special items, International Paper reported a third-quarter 2001 net loss of $275 million ($0.57 per share), compared with a net loss of $135 million ($0.38 per share) in the third quarter 2000 after special and extraordinary items. In the second quarter of 2001, the company reported a net loss of $313 million ($0.65 per share) after special items.
During the third quarter, International Paper continued to face tough competitive conditions and soft demand. The economic slowdown in the United States and other segments of the global economy continued to adversely impact demand for paper, packaging and wood products.
International Paper's global competitive position continues to be affected by the relative strength of the U.S. dollar. While there was marginal strengthening of the Euro versus the dollar during the quarter, the timing of the increase was insufficient to reverse the downward trend in export competitiveness.
"International Paper is continuing to streamline and improve its operations,'' said Dillon. "We ran our mills more efficiently in the third quarter. And this week, we announced the permanent closure of our Erie, Pa., Mill to better utilize more competitive pulp, paper and converting capacity within the company's uncoated freesheet system.
"We are also focused on cash flow and debt reduction, taking steps to enhance long term liquidity,'' said Dillon. In August, the company took advantage of favorable capital market conditions and issued $1 billion in aggregate principal amount of ten-year fixed rate notes. The majority of the proceeds was used on Oct. 8, 2001 to retire $800 million of money market notes due in 2002.
In addition, the company realized $350 million of merger benefits, through the first nine months of this year, from the June 2000 Champion acquisition.
Compared to third quarter 2000, earnings declined in most segments as the impact of the slow economy reduced demand for International Paper's products used for advertising, print, packaging and construction. Forest Products earnings did, however, improve compared to one year ago. The company realized higher lumber prices and volumes during the current quarter. Versus second quarter 2001, prices eroded slightly in most businesses and were partly offset by higher seasonal paper volumes.
Third-quarter segment earnings and business trends compared to the second quarter of 2001 are as follows.
Third-quarter earnings for Printing Papers were $146 million, up from $119 million in second quarter 2001 as a result of higher coated paper volumes reflecting holiday catalog demand. European paper results were slightly weaker than the prior quarter, due to the increased slowdown in European economies, which lagged the downturn in the U.S. economy.
Industrial and Consumer Packaging earnings were $133 million in the third quarter compared to $143 million in the second quarter, due to slightly lower prices and volumes.
Earnings for the company's distribution business, xpedx, declined to $5 million from $12 million last quarter, as a result of continued weak printing markets and slowing sales in packaging and industrial supplies.
Third-quarter Forest Products earnings of $184 million were flat compared with $182 million in second quarter 2001. Higher lumber and panel volumes were offset by lower prices.
Earnings at Carter Holt Harvey, International Paper's 50.5% owned subsidiary in New Zealand, fell to a loss of $1 million from earnings of $5 million in second quarter 2001. Improvement in construction markets in Australia was not sufficient to offset the negative impact of continuing price weakness in the log markets, low pricing for export pulp and linerboard, and high energy costs.
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