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2 MANHATTANVILLE ROAD
PURCHASE, NY 10577-2196
NEWS RELEASE
Media Contact: Jack Cox, 914-397-1952
Analyst Contacts: Carol Tutundgy, 914-397-1632
Rochelle Weitzner, 914-397-1623
INTERNATIONAL PAPER REPORTS FOURTH QUARTER EARNINGS OF $.28 PER SHARE
January 24, 2001
Purchase, N.Y. -- International Paper reported earnings before special and
extraordinary items of $145 million ($.28 per share) for the fourth quarter
compared with earnings before special items of $227 million ($.55 per share) for
the fourth quarter of 1999. Third-quarter 2000 earnings were $260 million ($.53
per share) before one-time charges.
For the year, International Paper reported earnings of $969 million ($2.16 per
share) before special and extraordinary items, compared with 1999 full year net
earnings of $551 million ($1.33 per share) before special and extraordinary
items.
Fourth-quarter 2000 net sales were $7.2 billion compared with $6.3 billion for
the same period in 1999. Sales in 2000 of $28.2 billion were up from $24.6
billion in sales for 1999 primarily due to the Champion acquisition.
"The slowing economy and rising energy costs hit during a period in which
demand is traditionally soft for most of our product grades. And as demand fell,
we maintained our commitment to keep our production in line with customer
orders, which negatively impacted overall sales," said John Dillon, chairman and
chief executive officer. "While many of these factors are continuing into the
opening months of 2001, the steps we are taking will lead to a stronger
International Paper for the long term."
John Faraci, executive vice president and CFO, will discuss earnings in a
webcast at 1 p.m. EST today. It can be accessed through the company's Internet
site, http://www.internationalpaper.com, under "Investor Information." Persons
who wish to listen to the live webcast must pre-register at the site this
morning. A replay of the webcast will also be available beginning at 3 p.m.
(EST) today.
International Paper has nearly completed its previously announced capacity
rationalization and realignment initiative. The company has closed its Mobile,
Ala. and Camden, Ark. mills, and completed the down-sizing of the Courtland,
Ala. mill. The closure of the Lockhaven, Pa. mill is proceeding on schedule.
The integration of International Paper and Champion International is proceeding
extremely well. The Champion merger synergies target has been increased by 20
percent, to $500 million. In the fourth quarter, realized synergies amounted to
$70 million.
International Paper, Continued.
Page 2
Asset sales are progressing rapidly as International Paper focuses on its three
core businesses -- paper, packaging and forest products. The company has
increased its asset sales target to $5 billion including forestlands, to be
completed by the end of 2001.
The company has paid down $900 million in debt since the Champion acquisition
and will continue to use cash proceeds from divestitures to pay down debt in
2001.
International Paper's financial discipline will result in the reduction of
capital spending to $1.2 billion in the year 2001, which is about 60 percent of
depreciation and amortization. The capital expenditure program in 2001 is 20
percent below the $1.4 billion spent in the year 2000.
Higher energy costs, particularly natural gas, in the fourth quarter
significantly impacted earnings. Energy costs were $40 million higher in the
fourth quarter compared with the third quarter and were $220 million higher on
the year. In response to high gas prices, the company switched to alternative
fuels where possible.
International Paper also took significant downtime in the fourth quarter to keep
production in line with demand. The company idled more than 800,000 tons of
capacity in the fourth quarter alone.
After special and extraordinary items, the company reported a loss of $371
million ($.85 per share) in the fourth quarter of 2000 compared with a net loss
of $135 million ($.38 per share) in the third quarter of 2000 after special and
extraordinary items. Special and extraordinary items in the fourth quarter
amounted to a loss of $516 million ($1.13 per share) after taxes. This included
charges of $752 million ($466 million after tax) primarily for the shutdown of
excess capacity, a gain of $363 million ($181 million after taxes and minority
interest) primarily for the sale of BBA and a loss of $373 million ($231 million
after tax) for the impairment of assets held for sale.
Full year 2000 net earnings after special and extraordinary items were $142
million ($.32 per share). Net earnings for 1999 after special and extraordinary
items were $183 million ($.44 per share).
PAPER
In the U.S. PRINTING AND COMMUNICATIONS PAPERS business, earnings reflect
extensive downtime taken during the fourth quarter to balance production with
weak demand in both uncoated paper and pulp. Much of the weakness was in
printing and office papers grades.
In the EUROPEAN PAPERS business, demand was strong, especially in Eastern
Europe, and pricing remained stable. In addition, backlog orders were good.
In the COATED AND SUPERCALENDERED PAPERS business, coated groundwood backlogs
reflected typical seasonal weakening with demand driven largely by catalog and
publication end uses. Coated freesheet, especially that which is driven by
general commercial printing, became weaker in the period. Due to the strength of
the U.S. dollar, imports were up.
In the company's distribution business, xpedx, the seasonal holiday slowdown and
poor December weather led to lower results.
PACKAGING
International Paper, Continued.
Page 3
In the INDUSTRIAL PACKAGING business, earnings were down due to softer domestic
corrugated demand and much slower export shipments as a result of the strong
U.S. dollar. Production was scaled back by nearly 25 percent during the quarter
to match supply with demand. At the same time box prices have held steady during
the fourth quarter in the U.S. and Europe. Demand will continue to be soft
during the seasonally slower January and February time-frame.
In the CONSUMER PACKAGING & INDUSTRIAL PAPERS business, results were lower than
expected due to weaker demand coupled with severe December weather in the south.
The company reduced production of bleached board by more than 10 percent during
the quarter to match supply with demand and prices have remained stable.
FOREST PRODUCTS
In the FOREST RESOURCES segment, stumpage prices for the quarter, for both
pulpwood and sawtimber, were below third-quarter prices, continuing the decline
which began in late 1999. Harvest volumes increased from third-quarter 2000, as
wood inventories rose to reach seasonally higher winter targets.
The LUMBER AND ENGINEERED WOOD PRODUCTS business reported a loss in the quarter
as a result of significant pricing pressure and weak demand resulting from lower
housing starts -- which perpetuated the oversupply of product.
International Paper (http://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 (SFI'sm') 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, International Paper has operations
in nearly 50 countries, employs more than 117,000 people and exports its
products to more than 130 nations.
# # # #
This news release includes forward-looking statements within the meaning of the
federal securities laws. A number of risks and uncertainties may cause actual
results to differ materially from the expectations or results indicated by these
forward-looking statements. These risks and uncertainties include, among other
things, the level of interest rates, demand for our products, which may be
affected by the relative strength of business activity domestically and abroad,
whether initiatives relating to capacity rationalization will achieve
anticipated results, whether additional merger synergies can be achieved, and
whether asset sales will be realized within the anticipated time frame, and
other factors included in our filings with the Securities and Exchange
Commission.
All numbers stated are preliminary and unaudited.
International Paper, Continued.
Page 4
INTERNATIONAL PAPER
SUMMARY OF CONSOLIDATED EARNINGS
Preliminary and Unaudited
(In millions except for net sales and per share amounts)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------ ------------------------------
2000 1999 2000 1999 (k)
---------- ---------- ---------- ---------
Net Sales (In billions) $7.2 $6.3 $28.2 $24.6
---------- ---------- ---------- ---------
Earnings (Loss) Before Interest, Income
Taxes, Minority Interest and
Extraordinary Items (252)(b) 289(h) 1,539(e) 989(i)
Interest expense, net 251 141 816 541
---------- ---------- ---------- ---------
Earnings (Loss) Before Income Taxes,
Minority Interest and Extraordinary
Items (503)(b) 148(h) 723(e) 448(i)
Income tax provision (benefit) (232)(b) 22(h) 117(e) 86(i)
Minority interest expense, net of taxes 50(b) 46(h) 238(e) 163(i)
---------- ---------- ---------- ---------
Earnings (Loss) Before Extraordinary Items (321)(b) 80(h) 368(e) 199(i)
Net Gain on Sales of Investments and
Businesses, net of taxes 181(c) - 315(f) -
Impairment Losses on Businesses to be
Sold, net of taxes (231)(d) - (541)(g) -
Loss on Extinguishment of Debt - - - (16)(j)
---------- ---------- ---------- ---------
Net Earnings (Loss) $(371)(b,c,d) $80(h) $142(e,f,g) $183(i,j)
========== ========== ========== =========
Earnings (Loss) Per Common Share Before
Extraordinary Items $(0.67)(b) $0.19(h) $0.82(e) $0.48(i)
Earnings (Loss) Per Common Share -
Extraordinary Items (0.10)(c,d) - (0.50)(f,g) (0.04)(j)
---------- ---------- ---------- ---------
Earnings (Loss) Per Common Share $(0.77)(a,b,c,d) $0.19(h) $0.32(a,e,f,g) $0.44(i,j)
========== ========== ========== =========
Earnings (Loss) Per Common Share -
Assuming Dilution $(0.77)(a,b,c,d) $0.19(h) $0.32(a,e,f,g) $0.44(i,j)
========== ========== ========== =========
Weighted-Average Shares of Common
Stock Outstanding 481.4 413.3 449.6 413.0
========== ========== ========== =========
(a) In order for the year-to-date earnings per share to equal the sum of
the quarters, a loss of $.85 is required in the fourth quarter. 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 $.18 per share higher than the twelve months
year-to-date earnings per share calculated based on the year-to-date
weighted-average number of shares outstanding. This is a result of 68.7
million shares being issued in June 2000 related to the Champion
acquisition. On a stand alone basis, the fourth quarter loss per share,
inclusive of special and extraordinary items was $.77 per share.
However, in order for the quarterly earnings per share to add to the
year-to-date earnings per share, a loss of $.85 per share is required.
International Paper, Continued.
Page 5
Continued:
(b) Includes a pre-tax charge of $35 million ($21 million after taxes) for
Union Camp and Champion merger- related items, a charge of $745 million
($462 million after taxes and minority interest) for shutdown and
restructuring reserves, and a $28 million pre-tax credit ($17 million
after taxes) for the reversal of reserves no longer required.
(c) Includes an extraordinary pre-tax gain of $368 million ($183 million
after taxes) related to the sale of Bush Boake Allen, and an
extraordinary loss of $5 million before taxes and minority interest ($2
million after taxes and minority interest) related to Carter Holt
Harvey's sale of its Plastics division.
(d) Includes an extraordinary pre-tax charge of $373 million ($231 million
after taxes) related to impairments of our Argentine investments, as
well as the Natchez Mill and Fine Papers business to be sold.
(e) Includes a pre-tax charge of $941 million ($584 million after taxes and
minority interest) for asset shutdowns of excess internal capacity,
restructuring reserves, and additions to existing Masonite litigation
reserves, a $62 million pre-tax charge ($38 million after taxes) for
Union Camp and Champion merger related items, and a $34 million pre-tax
credit ($21 million after taxes) for the reversal of reserves no longer
required.
(f) 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, an extraordinary pre-tax gain
of $368 million ($183 million after taxes) related to the sale of Bush
Boake Allen, and an extraordinary loss of $5 million before taxes and
minority interest ($2 million after taxes and minority interest)
related to Carter Holt Harvey's sale of its Plastics division.
(g) Includes an extraordinary pre-tax charge of $833 million ($541 million
after taxes) related to impairments of the Zanders, Masonite,
Argentine, Natchez Mill and Fine Papers businesses to be sold.
(h) Includes a $185 million pre-tax charge ($111 million after taxes and
minority interest) for restructuring and other charges, a $30 million
pre-tax charge ($18 million after taxes) for Union Camp merger
integration costs, and a $30 million pre-tax charge ($18 million after
taxes) for the establishment of additional legal reserves.
(i) Includes a pre-tax charge of $255 million ($175 million after taxes)
for Union Camp merger integration costs, a $338 million pre-tax charge
($204 million after taxes and minority interest expense) for
restructuring and other charges, and a $36 million pre-tax credit ($27
million after taxes) for the reversal of reserves no longer required.
(j) 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.
(k) Amounts have been restated to reflect the merger with Union Camp.
International Paper, Continued.
Page 6
INTERNATIONAL PAPER
SALES BY INDUSTRY SEGMENT
Preliminary and Unaudited
(In Millions)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------- ------------------------------
2000 1999 2000 1999
-------------- -------------- ------------- -------------
Printing & Communications Papers (1) $2,250 $1,525 $7,960 $5,840
Industrial & Consumer Packaging 1,905 1,835 7,625 7,050
Distribution 1,875 1,735 7,255 6,850
Chemicals & Petroleum 310 375 1,395 1,455
Forest Products 915 780 3,465 3,205
Carter Holt Harvey 370 430 1,675 1,605
Less: Intersegment Sales (1) (2) (397) (386) (1,195) (1,432)
-------------- -------------- ------------- -------------
$7,228 $6,294 $28,180 $24,573
============== ============== ============= =============
(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, Continued.
Page 7
INTERNATIONAL PAPER
EARNINGS BY INDUSTRY SEGMENT
Preliminary and Unaudited
(In Millions)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------- -----------------------------
2000 1999 2000 1999
---------- ---------- ---------- -------------
Printing & Communications Papers $ 266 $ 140 $ 959 $ 254
Industrial & Consumer Packaging 149 193 773 562
Distribution 23 29 120 105
Chemicals & Petroleum 43 39 161 124
Forest Products 110 176 602 724
Carter Holt Harvey 10 19 71 39
Corporate (1) 26
---------- ---------- ---------- -------------
Operating Profit 601 596 2,712 1,808
Interest expense, net (251) (141) (816) (541)
Minority interest adjustment 14 32 108 74
Corporate items, net (115) (91) (312) (336)
Restructuring and other charges (745) (218) (941) (338)
Merger integration costs (35) (30) (62) (255)
Reversal of reserves no longer required 28 34 36
---------- ---------- ---------- -------------
Earnings before income taxes, minority
interest and extraordinary items $(503) $ 148 $ 723 $ 448
========== ========== ========== =============
(1) Includes results from operations of Champion International Corporation
acquired on June 20, 2000. Beginning on July 1, 2000, the results of the
former Champion businesses have been included in the appropriate business
segment.
International Paper, Continued.
Page 8
INTERNATIONAL PAPER
PRODUCTION BY PRODUCT
(UNAUDITED)
2000 1999 1998
Printing Papers (In thousands of tons)
White Papers and Bristols (a)(e) 6,046 5,393 5,188
Coated Papers (e) 2,020 1,308 1,241
Market Pulp (b) (e) 2,584 2,082 2,020
Newsprint 109 100 95
Packaging
Containerboard (a) 4,454 4,837 4,670
Bleached Packaging Board 2,113 2,122 2,148
Industrial Papers 993 898 894
Industrial and Consumer Packaging (a)(c) 5,240 5,112 4,919
Specialty Products (In thousands of tons)
Tissue 164 158 148
Forest Products (In millions)
Panels (d)(e) 2,620 2,106 1,818
Lumber (e) 3,372 2,927 2,726
MDF 335 209 297
Particleboard 380 196 195
(a) Certain reclassifications and adjustments have been made to current and
prior year amounts.
(b) 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 and fourth quarter 2000.
International Paper, Continued.
Page 9
INTERNATIONAL PAPER COMPANY
CONSOLIDATED BALANCE SHEET
PRELIMINARY AND UNAUDITED
(IN MILLIONS)
DECEMBER 31, DECEMBER 31,
2000 1999
-------------------- --------------------
ASSETS
Current Assets
Cash and Temporary Investments $ 1,198 $ 453
Accounts and Notes Receivable, net 3,433 3,227
Inventories 3,182 3,203
Other Current Assets 2,237(a) 358
-------------------- -------------
10,050 7,241
-------------------- -------------
Plants, Properties and Equipment, Net 16,106 14,381
Forestlands 5,966 2,921
Investments 268 1,044
Goodwill 6,295 2,596
Deferred Charges and Other Assets 3,135 2,085
-------------------- -------------
Total Assets $41,820 $30,268
==================== =============
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable and current maturities $ 2,150 $ 920
Accounts Payable and Accrued Liabilities 4,970(a) 3,462
-------------------- -------------
Total Current Liabilities 7,120 4,382
-------------------- -------------
Long-Term Debt 12,591 7,520
Deferred Income Taxes 4,712 3,344
Other Liabilities 2,189 1,332
Minority Interest 1,355 1,581
Preferred Securities 1,805 1,805
Common Shareholders' Equity
Invested Capital 5,740 3,691
Retained Earnings 6,308 6,613
-------------------- -------------
Total Common Shareholders' Equity 12,048 10,304
-------------------- -------------
Total Liabilities and Common Shareholders' Equity $41,820 $30,268
==================== =============
(a) Includes assets and/or liabilities of businesses to be sold.