2 MANHATTANVILLE ROAD
PURCHASE, NY 10577-2196
NEWS RELEASE
MEDIA CONTACT: Jack Cox, 914-397-1952
James Lee, 914-397-1565
ANALYST CONTACTS: Carol Tutundgy, 914-397-1632
Rochelle Weitzner, 914-397-1623
INTERNATIONAL PAPER REPORTS THIRD QUARTER EARNINGS;
PLANS 1.2 MILLION TON CAPACITY CLOSURE
October 18, 2000
Purchase, N.Y. -- International Paper (NYSE: IP) today announced a 15 percent
increase over third-quarter 1999 earnings and plans to reduce production
capacity by 1.2 million tons annually in the uncoated paper, market pulp,
unbleached Kraft paper and containerboard businesses. Three mills will be closed
and one scaled back as part of the capacity reduction.
"International Paper's merger and acquisition activities over the past five
years have given us the flexibility and low cost capacity that allows us to
realign production more efficiently and reduce our higher-cost operations," said
company Chairman and CEO John Dillon. "Couple this with our on-going divestiture
activities, and the result will be a stronger, more focused, more profitable
IP."
"Quite frankly, this was not an easy decision to make. Terrific, hard working
people are hurt at times like this. But, we cannot continue to operate "business
as usual" if we are to win in the tough, global business environment in which we
operate today," Dillon added. "We will do everything possible to help reduce the
adverse impact on our employees and communities. On the positive side, we feel
strongly that by taking this action, both our shareowners and employees will
benefit from a stronger, more efficient, more focused IP."
Employees impacted by the decisions will have access to support services,
including outplacement services and job counseling. International Paper and
organized labor representatives will meet to bargain the effects of the closures
on unionized employees.
The shutdowns will result in reductions of approximately 820,000 tons (18%) of
International Paper's U.S. uncoated papers, 120,000 tons (7%) of its North
American market pulp, 230,000 tons (5%) of its U.S. containerboard, and 50,000
tons of unbleached Kraft paper capacity. Approximately 2,500 employees at the
mills and related forestry operations will be impacted by the shutdowns.
The affected facilities include mills in Mobile and Courtland, Alabama, Lock
Haven, Pennsylvania and Camden, Arkansas.
At the Mobile mill, all employees will be released, and the machines will be
prepared for indefinite shutdown.
International Paper, Continued.
Page 2
At Courtland a fiber line and related paper machine and pulp dryer will be
idled. Four more efficient paper machines will continue to operate at Courtland.
At Lock Haven all five machines will be shutdown. Two small machines that
produce specialty paper products will continue to operate until the technical
products can be successfully re-qualified and transferred to another
International Paper facility.
The Camden mill, which makes unbleached Kraft and multi-wall paper, is being
closed due to the decline of the Kraft paper market, excess capacity within
International Paper's Kraft & Containerboard system and shrinking customer
demand. Three machines will be shutdown. Moving the unbleached Kraft paper
production from Camden to mills at Savannah, Georgia and Roanoke Rapids, North
Carolina effectively removes 230,000 tons of the company's U.S. containerboard
capacity and 50,000 tons of unbleached Kraft paper.
At the conclusion of the rationalization program, International Paper will have
approximately 3.9 million tons in U.S. uncoated papers production capacity, 1.3
million tons in North American market pulp capacity, and 4.7 million tons of
U.S. containerboard capacity. IP's total global paper, paperboard and pulp
capacity, including Carter Holt Harvey, will be approximately 21.4 million tons
per year.
"Today's actions will improve our earnings and ROI," noted John Faraci,
Executive Vice President and Chief Financial Officer. "This plan will improve
our EBIT on an annual basis by more than $100 million vs. third quarter 2000,
during which we took substantial downtime resulting in significant
inefficiencies. We can improve the competitive position of our North American
paper assets, sharpen our business focus and improve our profitability. Future
capital expenditures will also be reduced as a result of these actions."
"We will focus on our key business segments and on meeting customers' needs with
a more efficient manufacturing system," added Dillon. "We will have a sharper
focus in our core businesses that will allow us to improve our product quality,
and improve the financial performance of our company - all to the benefit of our
people, customers, shareowners and communities."
Implementation of the rationalization plan will begin in the fourth quarter.
Charges associated with the shutdowns will be reported in the fourth quarter
2000 earnings.
International Paper today reported third-quarter 2000 earnings of $260 million
($.53 per share) before special and extraordinary items. This represents a 15
percent increase over third-quarter 1999 earnings of $193 million ($.46 per
share) before special and extraordinary items. Third-quarter 2000 net sales were
$7.8 billion, up from $6.3 billion in the same quarter a year ago.
International Paper reported a net loss of $135 million ($.38 per share) in the
third quarter of 2000, after special and extraordinary items, compared with net
earnings of $270 million ($.64 per share) in the second quarter of 2000 after
special items. Third-quarter 1999 net earnings were $142 million ($.34 per
share) after special and extraordinary items.
International Paper, Continued.
Page 3
Extraordinary items in the third quarter included a charge of $310 million after
taxes ($.64 per share) resulting from the anticipated sales of Masonite and
Zanders. Special items amounted to $85 million after taxes ($.18 per share) for
merger-related items and Masonite reserves.
Overall, International Paper's operating earnings were up 15 percent compared to
third-quarter 1999 earnings. Dillon said earnings held up well despite very
significant downtime in the company's Industrial Packaging and Printing and
Communications Papers segments and the decline in wood products prices.
"Our profit improvement initiatives are in place across the company and are
having a moderating effect on sharply rising energy and raw material costs,"
said John Dillon, chairman and chief executive officer. "Also, the U.S. dollar
strengthened during the quarter, impacting earnings from non-U.S. businesses and
reducing demand for products produced in the U.S. We completed the acquisition
of Champion in June and have moved quickly to start to capture merger benefits
during the third quarter. We expect to realize continued merger synergies
through the balance of the year."
The Industrial and Consumer Packaging segment reported earnings of $194 million
in the third quarter of 2000, up 13 percent from the same period of last year,
about four percent of which is a result of the Champion acquistition. Higher
material costs were offset by continued realization and pass-through of
linerboard price increases initiated during the second quarter, improved mix in
the box business and profit improvement programs across the sector. The bleached
board mills continued strong operating rates and price levels remain stable. The
containerboard system took over 400 thousand tons of downtime during the quarter
to balance production with demand.
Third-quarter earnings for the Printing and Communications Papers segment were
$303 million, $135 million of resulted from the Champion acquisition. Lower
uncoated freesheet demand and higher energy costs were offset by strong pulp
pricing and mill cost improvement plans. Market-related uncoated freesheet and
pulp downtime of 180,000 tons has helped balance inventories. A mid-September
price increase for uncoated freesheet was announced, some of which is currently
being realized. The market for coated groundwood remained strong during the
quarter, and backlogs remain good.
The European papers market remained strong in the third quarter, allowing a five
percent price increase on uncoated freesheet in local currencies.
Operating earnings for the company's distribution business, xpedx, were $32
million in the third-quarter, up 28 percent from the previous year period.
Results were driven largely by profit improvement efforts and continued Union
Camp merger synergies from the integration of Alling and Cory.
The Forest Products segment, which includes Building Materials and Forest
Resources, reported earnings of $169 million, compared with earnings of $199
million in third-quarter 1999. Demand for both pulpwood and sawtimber softened
during the quarter as paper mills and wood products plants took significant
downtime to balance supply with demand.
A conference call will be held at 1 p.m. EDT today to discuss earnings, as well
as the other important announcements of the day. John Dillon, Chairman and CEO
and John Faraci, Executive VP and CFO will be the conference call speakers.
International Paper, Continued.
Page 4
All interested parties are invited to listen to the conference call live via our
Internet site at www.internationalpaper.com and by clicking on the Investor
Information button. Persons who wish to listen to the live webcast of the 2000
3Q Earnings Conference Call must pre-register at the site. Registration is
available anytime prior to the start of the call. A replay of the call will also
be available on the web-site beginning at 4 p.m. EDT today. A slide
presentation, which will serve as the basis for the conference call, will be
available for download or viewing prior to the call.
International Paper (www.internationalpaper.com) is the world's largest paper
and forest products company. Businesses include paper, packaging, and forest
products. As one of the largest private forest landowners in the world, the
company manages its forests under the principles of the Sustainable Forestry
Initiative (SFIsm) program, a system that ensures the perpetual growing and
harvesting of trees while protecting wildlife, plants, soil, air and water
quality. Headquartered in the United States at Purchase, N.Y., International
Paper has operations in nearly 50 countries, employs more than 117,000 people
and exports its products to more than 130 nations.
STATEMENTS IN THIS PRESS RELEASE THAT ARE NOT HISTORICAL ARE FORWARD-LOOKING.
THESE STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY, INCLUDING RISKS RELATED TO WHETHER OR NOT THE
RATIONALIZATION PLANS WILL IMPROVE THE SUPPLY AND DEMAND BALANCE, AND WHETHER
THE OTHER ANTICIPATED BENEFITS OF THE SHUTDOWNS CAN BE REALIZED. IN ADDITION,
OTHER FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER INCLUDE, AMONG OTHER
THINGS, CHANGES IN OVERALL DEMAND, CHANGES IN DOMESTIC OR FOREIGN COMPETITION,
CHANGES IN THE COST OR AVAILABILITY OF RAW MATERIALS, AND THE COST OF COMPLIANCE
WITH ENVIRONMENTAL LAWS. IN VIEW OF SUCH UNCERTAINTIES, INVESTORS ARE CAUTIONED
NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS.
# # # #
INTERNATIONAL PAPER
SUMMARY OF CONSOLIDATED EARNINGS
Preliminary and Unaudited
(In millions except for net sales and per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ---------------------------------
2000 1999 2000 1999 (j)
--------- -------- ---------- ----------
NET SALES (IN BILLIONS) $7.8 $6.3 $21.0 $18.3
--------- -------- ---------- ----------
EARNINGS BEFORE INTEREST, INCOME
TAXES, MINORITY INTEREST AND
EXTRAORDINARY ITEMS 589 (i) 376 (e) 1,791 (c) 700 (g)
INTEREST EXPENSE, NET 278 134 565 400
--------- -------- ---------- ----------
EARNINGS BEFORE INCOME TAXES, MINORITY
INTEREST AND EXTRAORDINARY ITEMS 311 (i) 242 (e) 1,226 (c) 300 (g)
INCOME TAX PROVISION 71 (i) 54 (e) 349 (c) 64 (g)
MINORITY INTEREST EXPENSE, NET OF TAXES 65 43 188 117
--------- -------- ---------- ----------
EARNINGS BEFORE EXTRAORDINARY ITEMS 175 (i) 145 (e) 689 (c) 119 (g)
GAINS ON SALES OF INVESTMENTS, NET
OF TAXES AND MINORITY INTEREST - - 134 (d) -
IMPAIRMENT LOSSES ON BUSINESSES TO BE
SOLD, NET OF TAXES 310 (b) - 310 (b) -
LOSS ON EXTINGUISHMENT OF DEBT - 3 (f) - 16 (h)
--------- -------- ---------- ----------
NET EARNINGS (LOSS) $(135) (b,i) $142 (e,f) $513 (b,c,d) $103 (g,h)
--------- -------- ---------- ----------
--------- -------- ---------- ----------
EARNINGS PER COMMON SHARE BEFORE
EXTRAORDINARY ITEMS $0.36 (i) $0.35 (e) $1.57 (c) $0.29 (g)
EARNINGS (LOSS) PER COMMON SHARE -
EXTRAORDINARY ITEMS (0.64) (b) (0.01) (f) (0.40) (b,d) (0.04) (h)
--------- -------- ---------- ----------
EARNINGS (LOSS) PER COMMON SHARE $(0.28) (a,b,i) $0.34 (e,f) $1.17 (a,b,c,d) $0.25 (g,h)
--------- -------- ---------- ----------
--------- -------- ---------- ----------
EARNINGS (LOSS) PER COMMON SHARE -
ASSUMING DILUTION $(0.28) (a,b,i) $0.34 (e,f) $1.17 (a,b,c,d) $0.25 (g,h)
--------- -------- ---------- ----------
--------- -------- ---------- ----------
WEIGHTED-AVERAGE SHARES OF COMMON
STOCK OUTSTANDING 481.6 413.5 438.9 412.9
--------- -------- ---------- ----------
--------- -------- ---------- ----------
(a) IN ORDER FOR THE 2000 THIRD-QUARTER EARNINGS PER SHARE TO ADD UP TO THE
YEAR-TO-DATE EARNINGS PER SHARE, A LOSS OF $.38 PER SHARE IS REQUIRED.
The sum of each quarter's earnings (loss) per share for 2000 calculated
on the basis of the weighted-average shares outstanding during each of
the respective quarters is $.10 per share higher than the nine months
year-to-date earnings per share calculated based on the year-to-date
weighted-average number of shares outstanding. The reason for this is
that 68.7 million shares were issued in June 2000 related to the
Champion acquisition. On a stand alone basis, the third quarter loss
per share, inclusive of special and extraordinary items was $.28 per
share. However, in order for the quarterly earnings per share to add up
to the year-to-date earnings per share, a loss of $.38 per share is
required. The $.10 difference is essentially attributable to the effect
resulting from dividing the special and extraordinary items by the
year-to-date average number of shares outstanding.
CONTINUED:
(b) Includes an extraordinary pre-tax charge of $460 million ($310 after
taxes) related to the impairment of the Zanders and Masonite businesses
to be sold.
(c) Includes a pre-tax charge of $125 million ($80 million after taxes) for
additions to existing Masonite reserves, a charge of $71 million before
taxes and minority interest ($42 million after taxes and minority
interest) primarily for asset shutdowns of excess internal capacity and
cost reduction actions, and a $21 million net pre-tax charge ($13
million after taxes) for Union Camp and Champion merger related items.
(d) Includes an extraordinary gain of $385 million before taxes and
minority interest expense ($134 million after taxes and minority
interest expense) on the sale of our investment in Scitex and Carter
Holt Harvey's sale of its share of COPEC.
(e) Includes a pre-tax charge of $68 million ($41 million after taxes) for
Union Camp merger integration costs, and a $10 million pre-tax charge
($6 million after taxes) to increase existing environmental remediation
reserves related to certain former Union Camp facilities.
(f) Includes an extraordinary pre-tax charge of $5 million ($3 million
after taxes) for the refinancing of high interest Union Camp debt,
which International Paper assumed under the merger agreement.
(g) Includes a pre-tax charge of $225 million ($157 million after taxes)
for Union Camp merger integration costs, a $113 million pre-tax charge
($69 million after taxes) for restructuring and other charges, a $36
million pre-tax credit ($27 million after taxes) for the reversal of
reserves no longer required, and a $10 million pretax charge ($6
million after taxes) to increase existing environmental remediation
reserves related to certain former Union Camp facilities.
(h) Includes an extraordinary pre-tax charge of $26 million ($16 million
after taxes) for the refinancing of high interest Union Camp debt,
which International Paper assumed under the merger agreement.
(i) Includes a pre-tax charge of $125 million ($80 million after taxes) for
additions to existing Masonite reserves and a net pre-tax charge of $9
million ($5 million after taxes) for Union Camp and Champion merger
related items.
(j) Amounts have been restated to reflect the merger with Union Camp.
INTERNATIONAL PAPER
SALES BY INDUSTRY SEGMENT
Preliminary and Unaudited
(In Millions)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ -----------------------------
2000 1999 2000 1999
-------------- -------------- --------------- ------------
Printing & Communications Papers (1) $2,440 $1,480 $5,710 $4,315
Industrial & Consumer Packaging 1,930 1,780 5,720 5,215
Distribution 1,930 1,740 5,380 5,115
Chemicals & Petroleum 375 370 1,085 1,080
Forest Products 1,020 825 2,550 2,425
Carter Holt Harvey 435 410 1,305 1,175
Less: Intersegment Sales (1) (2) (329) (354) (798) (1,046)
-------------- -------------- --------------- ------------
$7,801 $6,251 $20,952 $18,279
-------------- -------------- --------------- ------------
-------------- -------------- --------------- ------------
(1) Certain reclassifications and adjustments have been made to prior year
amounts.
(2) Includes results from operations of Champion International Corporation
acquired on June 20, 2000. Beginning on July 1, 2000, the results of
the former Champion business have been included in the appropriate
business segment.
INTERNATIONAL PAPER
EARNINGS BY INDUSTRY SEGMENT
Preliminary and Unaudited
(In Millions)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ -----------------------------
2000 1999 2000 1999
-------------- -------------- --------------- ------------
Printing & Communications Papers $ 303 $ 84 $ 693 $ 114
Industrial & Consumer Packaging 194 171 624 369
Distribution 32 25 97 76
Chemicals & Petroleum 49 38 118 85
Forest Products 169 199 492 548
Carter Holt Harvey 21 12 61 20
Corporate (1) 26
-------------- -------------- --------------- ------------
OPERATING PROFIT 768 529 2,111 1,212
Interest expense, net (278) (134) (565) (400)
Minority interest adjustment 32 21 94 42
Corporate items, net (77) (96) (197) (245)
Restructuring and other charges (125) (10) (196) (120)
Merger integration costs (15) (68) (27) (225)
Reversal of reserves no longer required 6 6 36
-------------- -------------- --------------- ------------
EARNINGS BEFORE INCOME TAXES, MINORITY
INTEREST AND EXTRAORDINARY ITEMS $ 311 $ 242 $ 1,226 $ 300
-------------- -------------- --------------- ------------
-------------- -------------- --------------- ------------
(1) Includes results from operations of Champion International Corporation
acquired on June 20, 2000. Beginning Beginning on Beginning on July 1,
2000, the results of the former Champion business have been included in
the appropriate business segment.
INTERNATIONAL PAPER
PRODUCTION BY PRODUCT
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ -----------------------------
2000 1999 2000 1999
-------------- -------------- --------------- ------------
Printing Papers (In thousands of tons)
White Papers and Bristols (a)(e) 1,684 1,295 4,419 4,010
Coated Papers (e) 441 308 1,083 963
Market Pulp (b)(e) 753 545 1,790 1,538
Newsprint 26 26 81 74
Packaging
Containerboard (a) 1,039 1,230 3,433 3,601
Bleached Packaging Board 532 542 1,607 1,592
Industrial Papers 265 221 736 671
Industrial and Consumer Packaging (a) (c) 1,227 1,264 3,953 3,776
Specialty Products (In thousands of tons)
Tissue 41 37 124 118
Forest Products (In millions)
Panels (d)(e) 753 510 1,790 1,473
Lumber (e) 999 693 2,491 2,164
MDF 100 53 244 167
Particleboard 122 51 265 148
(a) Certain reclassifications and adjustments have been made to current and
prior year amounts.
(b) This excludes market pulp purchases.
(c) A significant portion of the tonnage was fabricated from paperboard and
paper produced at International Paper's own mills and included in the
containerboard, bleached packaging board and industrial papers amounts
in this table.
(d) Panels include plywood and oriented strand boards.
(e) Includes Champion for third quarter 2000.
INTERNATIONAL PAPER COMPANY
CONSOLIDATED BALANCE SHEET
PRELIMINARY AND UNAUDITED
(IN MILLIONS)
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------------- -------------------
ASSETS
Current Assets
Cash and Temporary Investments $ 1,171 $ 453
Accounts and Notes Receivable, net 3,819 3,227
Inventories 3,508 3,203
Other Current Assets 1,433 358
-------------------- -------------------
Total Current Assets 9,931 7,241
-------------------- -------------------
Plants, Properties and Equipment, Net 17,555 14,381
Forestlands 6,056 2,921
Investments 316 1,044
Goodwill 6,438 2,596
Deferred Charges and Other Assets 2,669 2,085
-------------------- -------------------
TOTAL ASSETS $ 42,965 $ 30,268
-------------------- -------------------
-------------------- -------------------
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable and current maturities of long-term debt $ 2,912 $ 920
Accounts Payable and Accrued Liabilities 4,512 3,462
-------------------- -------------------
Total Current Liabilities 7,424 4,382
-------------------- -------------------
Long-Term Debt 12,700 7,520
Deferred Income Taxes 4,669 3,344
Other Liabilities 2,244 1,332
Minority Interest 1,551 1,581
Preferred Securities 1,805 1,805
Common Shareholders' Equity
Invested Capital 5,773 3,691
Retained Earnings 6,799 6,613
-------------------- -------------------
Total Common Shareholders' Equity 12,572 10,304
-------------------- -------------------
TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY $ 42,965 $ 30,268
-------------------- -------------------
-------------------- -------------------