STAMFORD, Conn., Feb. 2 -- International Paper today reported 2003 fourth-quarter net earnings of $48 million ($0.10 per share), compared with a net loss of $130 million ($0.27 per share) in the fourth quarter 2002 and net earnings of $122 million ($0.25 per share) in the third quarter 2003. For the 2003 full year, International Paper reported net earnings of $302 million ($0.63 per share) compared with a net loss of $880 million ($1.83 per share) in 2002. Amounts in all periods include the effects of special items. Fourth-quarter 2003 net sales rose to $6.5 billion, compared with 2002 fourth-quarter net sales of $6.3 billion, and 2003 third-quarter sales of $6.4 billion. Sales for the full year in 2003 were $25.2 billion compared with $25.0 billion in 2002. Before special items, earnings for the 2003 fourth quarter were $110 million ($0.23 per share), compared with 2002 fourth-quarter earnings before special items of $160 million ($0.33 per share) and third-quarter 2003 earnings before special items of $117 million ($0.24 per share). Fourth-quarter 2003 earnings included a $20 million reduction in the provision for income taxes ($0.04 per share) reflecting a reduction in the full-year effective tax rate, excluding special items and accounting changes, to 22 percent from the 25 percent estimated in the 2003 third quarter. The reduction in the rate was due to a higher proportion of taxable income in lower tax rate jurisdictions. For the year 2003, International Paper reported earnings before special items of $384 million ($0.80 per share), compared with 2002 full-year earnings of $540 million ($1.12 per share) before special items. "Despite the normal seasonal slowdown in demand and continued price pressure in uncoated paper and industrial packaging, we benefited from improved pricing in lumber and plywood as well as pulp," said John Faraci, International Paper chairman and chief executive officer. "Overall, the business environment was tough throughout 2003, with demand lagging U.S. economic growth -- especially for paper and packaging products -- and weak pricing. However, good operational performance and our continued focus on improving our internal costs and product mix partially offset high raw material and pension costs. This concentration on customers and focusing on the costs we can control are giving us significant traction, which will enhance our earnings as the economy improves." Commenting on the coming year, Faraci said, "We expect a slow start in the first quarter, with mixed pricing and continued high costs for energy and wood. However, there are clear signs of momentum in the U.S. and world economies, and for the balance of 2004, we see demand and pricing improving for containerboard, uncoated free sheet and pulp." Effects of Special Items Special items in the 2003 fourth quarter included a pretax charge of $101 million ($61 million after taxes and minority interest) for restructuring and other costs, $21 million ($26 million after taxes) of net losses on sales and impairments of businesses held for sale and a $23 million credit ($15 million after taxes) for the net reversal of restructuring and realignment reserves no longer required. In addition, a $13 million decrease in the income tax provision, after minority interest, was recorded in the fourth quarter reflecting a favorable settlement with Australian tax authorities of net operating loss carryforward credits. The $101 million charge for restructuring and other costs included $91 million ($55 million after taxes and minority interest) for facility closures and organizational restructuring programs, $29 million ($18 million after taxes) for additional legal reserves, and a credit of $19 million ($12 million after taxes) for gains on early extinguishment of debt. The net after-tax effect of these special items was an expense of $0.12 per share. Additionally, an after-tax charge of $3 million ($0.01 per share) was recorded for the cumulative effect of an accounting change for the adoption of the provisions of Financial Interpretation No. 46, Consolidation of Variable Interest Entities, for a total expense of $0.13 per share in the quarter from special items and accounting changes. Fourth-quarter 2002 special items consisted of a pre-tax charge of $147 million ($98 million after taxes and minority interest) for restructuring and other costs, a pre-tax charge of $450 million ($278 million after taxes) for additions to existing exterior siding and roofing legal reserves, a pre-tax credit of $10 million ($4 million after taxes) to adjust accrued costs of businesses sold, a pre-tax credit of $58 million ($36 million after taxes) for the net reversal of restructuring and realignment reserves no longer required, and a $46 million credit for an adjustment of deferred state income tax reserves. The $147 million charge for restructuring and other costs included $101 million ($71 million after taxes and minority interest) for facility closures, administrative realignment severance costs, and cost reduction actions, and $46 million ($27 million after taxes and minority interest) for early debt retirement costs. The net after-tax effect of these special items was an expense of $0.60 per share. Special items in the 2003 third quarter included a pre-tax charge of $93 million ($59 million after taxes), including $33 million for facility closure costs, $38 million for severance costs associated with organizational restructuring programs, $8 million for early debt retirement costs, and $14 million for additional legal reserves; a pre-tax charge of $1 million ($1 million after taxes) to adjust costs of businesses previously sold; and a pre-tax credit of $8 million ($5 million after taxes) for the net reversal of restructuring and realignment reserves no longer required. In addition, a decrease in the income tax provision of $60 million was recorded reflecting a favorable revision of estimated tax reserves upon filing of the 2002 federal income tax return and increased research and development credits. The net after-tax effect of these items was income of $0.01 per share. Segment Information Operating profits of $454 million for the fourth quarter of 2003 were down from the third-quarter operating profits of $489 million due to higher costs. Operating profits were below fourth-quarter 2002 operating profits of $486 million, due to higher raw material costs, lower prices, and weaker volumes, which were partially offset by cost improvements. Fourth-quarter 2003 segment operating profits and business trends compared with the third quarter of 2003 are as follows: Fourth-quarter operating profits for Printing Papers were $66 million compared with third-quarter 2003 operating profits of $120 million. During the quarter, pulp volume and average price realizations were up, however volumes for uncoated free sheet were down slightly and average pricing was also lower. The coated business continued to be hampered by import pressures due to weak overseas demand, and coated volumes were lower as the catalog season ended. Industrial and Consumer Packaging operating profits were $100 million in the fourth quarter, compared with $107 million in the third quarter, as lower prices were partially offset by higher sales volumes in containerboard and bleached board. The company's distribution business, xpedx, reported operating profits of $21 million for the fourth quarter 2003 compared with operating profits in the third quarter of $24 million, as sales volumes were down in the printing papers, facility supplies and graphics segments. Fourth-quarter Forest Products operating profits of $236 million were up from $201 million in the third quarter 2003 as higher lumber and plywood prices more than offset lower volumes. Operating profits at Carter Holt Harvey, International Paper's 50.5 percent owned subsidiary in New Zealand, were $14 million in the fourth quarter, compared with third-quarter operating profits of $19 million as a result of lower export volumes and earnings, driven by higher freight costs and the weaker U.S. dollar. Fourth-quarter 2003 corporate net expenses of $144 million were in line with third-quarter 2003 net expenses of $138 million but higher than fourth-quarter 2002 net expenses of $51 million. The increase between the fourth quarter 2002 and fourth quarter 2003 was largely due to higher pension, supply chain initiative, and inventory-related costs. The 2002 fourth quarter also included a gain from the sale of stock obtained from an insurance company demutualization. Full year 2003 corporate net expenses were $466 million as compared to $253 million of net expense in 2002 with year-over-year increases attributable to higher 2003 pension and supply chain initiative costs, offset in part by gains on energy hedging transactions. In addition, 2002 included gains from the insurance company demutualization stock sale and foreign exchange.