[INTERNATIONAL PAPER LOGO]
INTERNATIONAL PAPER PLAZA
400 ATLANTIC STREET
STAMFORD, CT 06921
News Release
Media Contacts: Jennifer Boardman, 203-541-8407
Kathleen Bark, 203-541-8418
Investor Contacts: Darial Sneed, 203-541-8541
Brian Turcotte, 203-541-8632
International Paper Reports Higher Second-Quarter 2004 Earnings as
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Demand Remains Strong
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o Net earnings of $193 million up 119 percent from 2003 second-quarter
earnings of $88 million.
o Net sales increased to $6.5 billion from second-quarter 2003 net sales
of $6.1 billion.
STAMFORD, Conn. - July 26, 2004 - International Paper (NYSE: IP) today reported
second-quarter 2004 net earnings of $193 million ($0.40 per share), compared
with $88 million ($0.19 per share) in the second quarter of 2003 and $73 million
($0.15 per share) in the first quarter of 2004. Amounts include the effects of
special items and discontinued operations in all periods.
Earnings Per Share Summary
Second Second First
Quarter Quarter Quarter
2004 2003 2004
----- ----- ----
Net Earnings $0.40 $0.19 $0.15
Less - Income from Discontinued Operations
(including gain on sale of CHH Tissue) (0.19) (0.01) (0.01)
----- ----- -----
Earnings from Continuing Operations 0.21 0.18 0.14
Add back - Special Items Expense 0.20 -- 0.02
----- ----- -----
Earnings from Continuing Operations and Before
Special Items $0.41 $0.18 $0.16
Earnings from continuing operations and before special items in the 2004 second
quarter were $198 million ($0.41 per share), compared with $86 million ($0.18
per share) in the second quarter of 2003 and $79 million ($0.16 per share) in
the first quarter of 2004.
Earnings from continuing operations (which includes special items) were $101
million ($0.21 per share) in the 2004 second quarter, compared with 2003
second-quarter earnings of $85 million ($0.18 per share) and 2004 first-quarter
earnings of $70 million ($0.14 per share).
Amounts in all periods have been restated to exclude as a discontinued operation
the earnings of Carter Holt Harvey's tissue business that was sold in May 2004.
Second-quarter 2004 net sales were $6.5 billion, compared with second-quarter
2003 net sales of $6.1 billion and 2004 first-quarter sales of $6.4 billion.
"I'm pleased with the momentum in our earnings this quarter," said John Faraci,
International Paper chairman and chief executive officer. "Compared with last
year's second quarter, our volumes were up sharply, we realized higher average
sales prices for wood products, and we had lower interest expense. We also
continued to improve the way we manage our costs. While demand is less robust in
Western Europe, economic conditions are improving in North America, Eastern
Europe and South America. These improving business conditions, combined with
excellent mill performance and our ongoing focus on cost management, are
contributing to our improved profitability."
Commenting on the outlook for the third quarter, Faraci said, "We expect the
positive trend in business conditions will continue. Demand remains strong,
which should have a positive impact on our paper and packaging businesses.
However, the positive impact in paper and packaging is expected to be somewhat
offset by lower wood products earnings, higher transportation and chemical
costs, and continuing high energy costs."
Segment Information
Operating profits of $567 million for the second quarter were up from the
first-quarter 2004 operating profits of $432 million due primarily to higher
average price realizations and improved operations, particularly in the United
States.
Second-quarter segment operating profits and business trends compared with the
first quarter of 2004 are as follows:
Second-quarter operating profits for Printing Papers were $141 million compared
with first-quarter operating profits of $83 million as a result of higher
average pricing for uncoated free sheet and market pulp as well as very good
operational performance across the U.S. mill system. Coated paper sales volumes
were also higher amid improving demand, particularly for coated groundwood.
Industrial and Consumer Packaging operating profits were $111 million in the
second quarter, compared with $79 million in the first quarter, as a result of
higher average pricing for containerboard and boxes, and stronger operations as
well as improved volumes in the box business. While bleached board volume and
pricing was flat, demand was seasonally stronger in the converting businesses.
The company's distribution business, xpedx, reported operating profits of $21
million for the second quarter compared with operating profits in the first
quarter of $17 million, due to improved sales and operating costs.
Second-quarter Forest Products operating profits were $273 million, compared
with earnings of $232 million in the first quarter primarily as a result of
higher average pricing and volumes for lumber and plywood, which more than
offset lower income from land sales and lower timber harvest volumes.
Operating profits at Carter Holt Harvey, International Paper's 50.5 percent
owned subsidiary in New Zealand, were $7 million in the second quarter, compared
with first-quarter operating profits of $11 million as a result of a $3 million
loss on sale of the Chilean packaging operations that was recorded as a special
item.
Net corporate expenses of $102 million in the 2004 second quarter were lower
than 2004 first-quarter net expenses of $110 million, but were higher than net
expenses of $96 million in the second quarter of 2003. The decrease compared
with the first quarter was principally due to lower overhead costs. Higher
pension costs and lower natural gas hedging gains, partially offset by lower
overhead costs, were the major factors in the increase from the 2003 second
quarter.
Effects of Special Items
Special items in the 2004 second quarter included a charge of $107 million
before taxes and minority interest ($63 million after taxes and minority
interest) for restructuring and other costs, a charge of $36 million before
taxes and minority interest ($32 million after taxes and minority interest) for
estimated losses on sales and impairments of businesses held for sale and a $5
million credit ($3 million after taxes and minority interest) for the net
reversal of restructuring and realignment reserves no longer required. In
addition, a $5 million net increase in the tax provision, after minority
interest, was recorded in the quarter reflecting a charge for an adjustment of
deferred tax balances and a credit from the reduction of valuation reserves for
capital loss carryovers. The $107 million charge for restructuring and other
costs included $42 million ($23 million after taxes and minority interest) for
organizational restructuring programs and $65 million ($40 million after taxes)
for losses on early extinguishment of debt. The $36 million charge for estimated
losses on sales and impairments of businesses held for sale included $4 million
before taxes recorded in the Packaging segment and $3 million before taxes
recorded in the Carter Holt Harvey segment for the estimated loss on the sale of
Food Pack S.A. in Chile. The net after-tax effect of all of these special items
was an expense of $0.20 per share. Also in the 2004 second quarter, the sale of
the Carter Holt Harvey tissue business was completed. The net gain on this sale
of $90 million after taxes and minority interest is included in discontinued
operations.
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 second quarter included charges of $81 million before
taxes ($50 million after taxes) for restructuring and other costs, a $10 million
pre-tax charge ($6 million after taxes) to adjust previous estimated
gains/losses of businesses sold and a pre-tax credit of $9
million ($5 million after taxes and minority interest) for the net reversal of
restructuring and realignment reserves no longer required. The $81 million
charge for restructuring and other costs included $51 million ($32 million after
taxes) for facility shut-down and organizational restructuring program costs,
$20 million ($12 million after taxes) for legal reserves and $10 million ($6
million after taxes) for losses on early extinguishment of debt. In addition, a
$50 million tax provision reduction was recorded in the quarter reflecting
settlements of prior period tax issues. The net after-tax effect of these
special items was $0.00 per share.
The company will hold a webcast to discuss earnings and current market
conditions at 10 a.m. (EDT) today. All interested parties are invited to listen
to the webcast live via the company's Internet site at
http://www.internationalpaper.com by clicking on the Investor Information
button. Persons who wish to listen to the live earnings webcast must
pre-register at the site prior to the webcast. A replay of the webcast will also
be available on the Web site beginning at noon today.
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'r' program, a system that ensures the continual planting, growing and
harvesting of trees while protecting wildlife, plants, soil, air and water
quality. Headquartered in the United States, International Paper has operations
in over 40 countries and sells its products in more than 120 nations.
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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 but not limited to, the strength of
demand for the company's products and changes in overall demand, the effects of
competition from foreign and domestic producers, the level of housing starts,
changes in the cost or availability of raw materials, unanticipated expenditures
related to the cost of compliance with environmental and other governmental
regulations, the ability of the company to continue to realize anticipated cost
savings, performance of the company's manufacturing operations, results of legal
proceedings, changes related to international economic conditions, changes in
currency exchange rates, particularly the relative value of the U.S. dollar to
the Euro, economic conditions in developing countries, specifically Brazil and
Russia, the current military action in Iraq and the war on terrorism. We
undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. These and
other factors that could cause or contribute to actual results differing
materially from such forward looking statements are discussed in greater detail
in the company's Securities and Exchange Commission filings.