International Paper Narrows Net Loss in Q4: xpedx makes $28 Million
Press release from the issuing company
STAMFORD, Conn., Jan. 30 -- International Paper today reported a 2002 fourth-quarter net loss of $130 million ($0.27 per share), compared with a net loss of $572 million ($1.19 per share) in the fourth quarter 2001 and net earnings of $145 million ($0.30 per share) in the third quarter 2002. For the 2002 full year, International Paper reported a net loss of $880 million ($1.83 per share) compared with a net loss of $1.2 billion ($2.50 per share) in 2001. Amounts in all periods include the effects of special items.
Fourth-quarter 2002 net sales totaled $6.3 billion, the same as in the 2001 fourth quarter, and slightly below 2002 third-quarter sales of $6.4 billion. Sales for the full year in 2002 were $25.0 billion compared with $26.4 billion in 2001.
Before special items, earnings for the 2002 fourth quarter were $160 million ($0.33 per share), compared with 2001 fourth-quarter earnings before special items of $58 million ($0.12 per share) and third-quarter 2002 earnings before special items of $153 million ($0.32 per share).
For the year 2002, International Paper reported earnings before special items of $540 million ($1.12 per share), compared with 2001 full-year earnings of $214 million ($0.44 per share) before special and extraordinary items.
"It's a significant achievement that the company increased fourth-quarter operating earnings by 50 percent over the fourth quarter of last year despite sharply lower pricing. We also maintained the momentum we gained in the second and third quarters of this year even amid seasonally weaker fourth-quarter volumes," said John Dillon, International Paper chairman and chief executive officer. "Our 2002 full year operating performance demonstrates that our internal programs continue to improve our bottom line."
As in the prior 2002 quarters, fourth-quarter results reflect the elimination of goodwill amortization effective Jan. 1, 2002, resulting in an increase of $0.10 per share in the fourth quarter ($0.38 per share for the twelve months ended Dec. 31) compared with 2001 results. During the fourth quarter, the company also benefited from an adjustment in the annual tax rate that resulted in a $0.04 per share improvement in earnings before special items for the quarter as compared with third quarter 2002.
Special items in the 2002 fourth quarter consisted of a pre-tax charge of $101 million ($71 million after taxes and minority interest) for facility closures, administrative realignment severance costs, and cost reduction actions, a pre-tax charge of $450 million ($278 million after taxes) for additions to existing exterior siding legal reserves, a pre-tax charge of $46 million ($27 million after taxes and minority interest) for early debt retirement costs, a pre-tax credit of $58 million ($36 million after taxes) for the reversal of restructuring and realignment reserves no longer required, a pre-tax credit of $10 million ($4 million after taxes) to adjust accrued costs of businesses sold, and a $46 million credit for an adjustment of deferred state income tax reserves.
Special items in the 2001 fourth quarter included a pre-tax charge of $171 million ($111 million after taxes) for asset shutdowns of excess internal capacity and cost reduction actions, a pre-tax charge of $591 million ($530 million after taxes) related to dispositions and asset impairments of businesses held for sale, and a pre-tax credit of $17 million ($11 million after taxes) for the reversal of reserves no longer required.
Full year 2002 results also included a transitional goodwill impairment charge of approximately $1.2 billion for the effect of adopting SFAS No. 142, "Goodwill and Other Intangible Assets", that was recorded as an accounting change in first quarter operating results as required by the statement. Results for 2001 included a $16 million after-tax charge for the cumulative effect of a change in accounting for derivatives and hedging activity.
As previously announced, International Paper recorded a $1.5 billion after-tax direct charge to shareholders' equity in the fourth quarter of 2002, with no impact on earnings, for the write-off of a prepaid pension asset and establishment of a minimum liability for the shortfall of the market value of U.S. plan assets below plan accumulated benefit obligations. This adjustment is required by U.S. Generally Accepted Accounting Principles (GAAP) when the accrued pension liability exceeds the market value of plan assets. A recently completed funding study indicates, however, that the probability of required cash contributions to the plan over the next several years is low.
Commenting on the coming year, Dillon said, "We expect a seasonally weak first quarter, but anticipate improvement in the spring. Additionally, there are upside opportunities associated with the potential passage of an economic stimulus package, improved U.S. dollar and related export competitiveness, as well as the possibility of greater certainty relating to the Iraqi situation. Internally, we will continue to capture more cost and mix improvements and focus on improving our returns on a relative and absolute basis."
Segment Information
Compared with fourth quarter 2001, operating profits were up in most segments reflecting the continued success of improvements in the company's cost structure.
Fourth-quarter 2002 segment operating profits and business trends compared with the third quarter of 2002 are as follows.
Fourth-quarter operating profits for Printing Papers were $157 million compared with third-quarter 2002 operating profits of $180 million as a result of seasonally weaker sales volumes in the North American businesses.
Industrial and Consumer Packaging operating profits were $116 million in the fourth quarter, compared with $128 million in the third quarter as a result of lower containerboard, box and bleached board sales volumes and mixed pricing.
The company's distribution business, xpedx, reported operating profits of $28 million for the fourth quarter 2002 compared with operating profits in the third quarter of $23 million principally due to continued improvement in the xpedx cost structure.
Fourth-quarter Forest Products operating profits of $156 million were down from $164 million in the third quarter 2002 as a result of lower lumber and plywood sales volumes, and lower lumber prices.
Operating profits at Carter Holt Harvey, International Paper's 50.5 percent owned subsidiary in New Zealand, were $16 million in the fourth quarter 2002, flat with third-quarter 2002 operating profits as the business continued to benefit from strong housing markets in Australia and New Zealand.
Net corporate expenses decreased from $71 million in the third quarter of 2002 to $51 million in the fourth quarter due primarily to lower inventory-related costs and the sale of shares received from an insurance company demutualization, offset in part by lower net foreign exchange gains and an increase in benefit-related expenses.