International Paper Reports Higher Q1 Earnings, xpedx profits $17 million
Press release from the issuing company
STAMFORD, Conn., April 23 -- International Paper today reported first-quarter 2004 net earnings of $73 million ($0.15 per share), compared with $44 million ($0.09 per share) in the first quarter of 2003 and $48 million ($0.10 per share) in the fourth quarter of 2003. Amounts include the effects of special items and discontinued operations in all periods and accounting changes in the first and fourth quarters of 2003.
Earnings from continuing operations were $70 million ($0.14 per share) in the 2004 first quarter, compared with 2003 first-quarter earnings of $51 million ($0.10 per share) and 2003 fourth-quarter earnings of $48 million ($0.10 per share). Amounts in all periods have been restated to exclude as a discontinued operation the earnings of the tissue business of Carter Holt Harvey that is expected to be sold in May 2004.
Earnings from continuing operations and before special items in the 2004 first quarter were $79 million ($0.16 per share), compared with $65 million ($0.13 per share) in the first quarter of 2003 and $107 million ($0.22 per share) in the fourth quarter of 2003.
First-quarter 2004 net sales were $6.4 billion, compared with first-quarter 2003 net sales of $6.0 billion and 2003 fourth-quarter sales of $6.3 billion.
"I'm pleased that we were able to more than offset the continued high costs of wood and energy with a better operational performance and higher sales volumes for the quarter, particularly in uncoated free sheet, bleached board and containerboard," said John Faraci, International Paper chairman and chief executive officer. "Our focus on customers is having an impact, despite the seasonally slow demand we typically experience in the winter months. Overall average pricing for the quarter was down from the first quarter of last year; but in March, we began to see the impact of previously announced price increases in industrial packaging, uncoated free sheet, pulp and some of our bleached board grades."
Commenting on the outlook for the second quarter, Faraci said, "We're seeing a pick-up in demand for our products in most regions of the world, and average price realizations in the second quarter should be higher. This upturn, combined with lower wood costs and our continued focus on cost control, should position us to deliver a stronger second quarter."
Effects of Special Items
Special items in the 2004 first quarter included a pre-tax charge of $30 million before taxes ($19 million after taxes) for restructuring and other costs, a pre-tax credit of $9 million ($6 million after taxes) to adjust previous estimated gains/losses of businesses sold and a $7 million credit ($4 million after taxes) for the net reversal of restructuring and realignment reserves no longer required. The $30 million charge for restructuring and other costs included $14 million ($9 million after taxes) for organizational restructuring programs and $16 million ($10 million after taxes) for losses on early extinguishment of debt. The net after-tax effect of these special items was an expense of $0.02 per share.
Special items in the 2003 fourth quarter included a pre-tax 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," resulting in a total expense of $0.13 per share in the quarter from special items and 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 costs related to facility closures and organizational restructuring programs. 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.
Operating profits of $432 million for the first quarter were down from the fourth-quarter 2003 operating profits of $447 million due to lower average price realizations, lower levels of land sales and higher energy costs, all of which more than offset higher volumes and improved operations. Operating profits were higher than first-quarter 2003 operating profits of $406 million, due to improved costs and higher volumes, which were partially offset by lower average sales prices and higher raw material costs.
First-quarter segment operating profits and business trends compared with the fourth quarter of 2003 are as follows:
First-quarter operating profits for Printing Papers were $83 million compared with fourth-quarter 2003 operating profits of $65 million. Higher average pulp price realization, stronger volumes for uncoated free sheet and strong results from Europe and Brazil were somewhat offset by lower average price realization on uncoated free sheet. The coated business continues to be impacted by import pressures, and coated volumes were flat in a seasonally slow period.
Industrial and Consumer Packaging operating profits were $79 million in the first quarter, compared with $111 million in the fourth quarter, due to lower average price realizations that more than offset better operational performance.
The company's distribution business, xpedx, reported operating profits of $17 million for the first quarter compared with operating profits in the fourth quarter of $18 million, on somewhat seasonally lower volumes.
First-quarter Forest Products operating profits were $232 million, compared with earnings of $236 million in the fourth quarter of 2003 as higher wood products results were offset by lower gains from forestland sales and slightly lower harvest volumes.
Operating profits at Carter Holt Harvey, International Paper's 50.5 percent owned subsidiary in New Zealand, were $11 million in the first quarter, compared with fourth-quarter operating profits of $8 million as a result of higher prices and lower operating costs.
Corporate expenses, net, of $110 million in the 2004 first quarter were lower than 2003 fourth-quarter net expenses of $144 million, but were higher than net expenses of $88 million in the first quarter of 2003. The decrease compared with the fourth quarter was principally due to lower overhead and inventory-related costs. Higher pension and other benefit-related costs were the major factors in the increase from the 2003 first quarter.
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