International Paper Reports Q1 Earnings, Swings to a Profit from Previous Quarter
Press release from the issuing company
STAMFORD, Conn., April 24 -- International Paper today reported first-quarter 2003 net earnings of $44 million ($0.09 per share), compared with a net loss of $1,110 million ($2.31 per share) in the first quarter of 2002 and a net loss of $130 million ($0.27 per share) in the fourth quarter of 2002. Amounts in all periods include the effects of special items, with the first-quarter amounts in both years also reflecting a cumulative effect of an accounting change.
Before the cumulative effects of accounting changes and special items, earnings for the first quarter of 2003 were $68 million ($0.14 per share), compared with $58 million ($0.12 per share) in the 2002 first quarter and $160 million ($0.33 per share) in the fourth quarter of 2002.
First-quarter 2003 net sales totaled $6.1 billion, compared with $6.0 billion in the first quarter of 2002 and $6.3 billion in the fourth quarter of 2002.
"Despite adverse weather, higher energy costs and a sluggish world economy, I'm encouraged by our ability to achieve higher year-over-year operating earnings," said John Dillon, International Paper chairman and chief executive officer. "While we're still nowhere near where we want to be, our strong focus on internal improvements and customer service continues to positively impact our results."
Special Items and the Cumulative Effects of Accounting Changes
Special items in the 2003 first quarter included a net charge of $23 million before taxes and minority interest ($14 million after taxes and minority interest or $0.03 per share) for certain costs related to the shutdown of the Natchez, Miss., dissolving pulp mill, and other charges for organizational realignments and related severance. Also in the quarter, the company adopted Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement Obligations", resulting in a $10 million after-tax charge ($0.02 per share) for the cumulative effect of a change in accounting.
Special items in the first quarter of 2002 consisted of a $10 million pre-tax credit ($7 million after taxes) for the reversal of reserves no longer required. In addition, the company also recorded a cumulative effect of an accounting change of $1.2 billion in the 2002 first quarter for the transitional goodwill impairment charge from the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets".
Special items in the fourth quarter of 2002 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.
A reconciliation of earnings before special items to net earnings (loss), including information regarding the cumulative effect of accounting changes and special items, is presented in a table in this press release.
Compared with the first quarter of 2002, operating profits were up slightly as higher energy costs and extreme weather conditions that affected fiber costs were offset by volume and pricing gains.
First-quarter 2003 segment operating profits and business trends compared with the fourth quarter of 2002 were as follows.
First-quarter operating profits for Printing Papers were $122 million compared with fourth-quarter 2002 operating profits of $157 million due to higher energy and fiber costs as well as weather-related operating problems at U.S. mills.
Industrial and Consumer Packaging operating profits were $89 million in the first quarter, compared with $116 million in the 2002 fourth quarter as higher Industrial Packaging volumes were offset by seasonally weaker demand in Consumer Packaging as well as higher energy and fiber costs.
The company's distribution business, xpedx, reported operating profits of $15 million for the first quarter of 2003 compared with operating profits in the fourth quarter of 2002 of $28 million, due to seasonally lower sales and higher energy costs that impacted warehousing and delivery costs.
First-quarter Forest Products operating profits of $161 million were up slightly from $156 million in the fourth quarter of 2002 as slightly improved lumber and plywood results offset lower harvest volumes and lower gains from land sales.
Operating profits at Carter Holt Harvey, International Paper's 50.5 percent owned subsidiary in New Zealand, were $16 million in the first quarter of 2003, flat with fourth-quarter 2002 operating profits amid improved paper and pulp results offset by lower results in forests and wood products.
Corporate items, net, were $88 million for the 2003 first quarter, slightly lower than $94 million in the first quarter of 2002, but higher than in the fourth quarter of 2002 due to an increase in pension expense and higher supply chain initiative costs, somewhat offset by lower benefit costs. Fourth- quarter expenses were also lower due to proceeds from the sale of shares received from an insurance company demutualization.
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