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February 13, 2008 |
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INT'L PAPER: Earnings Drop to US$327 Mln in Qtr. Ended Dec. 31 International Paper Co. reported net earnings of US$327 million in fourth-quarter ended Dec. 31, 2007, compared with net earnings of US$217 million in the prior quarter and net earnings of US$2 billion in the fourth quarter of 2006. The company reported preliminary full-year 2007 net earnings total of US$1.2 billion compared with net earnings total of US$1.1 billion in 2006. Amounts in all periods include special items; most notably, 2006 fourth-quarter net earnings include an after-tax gain of US$2.7 billion from the sale of U.S. forestlands. "We increased profits before special items by 52% in 2007, which is strong evidence that the transformation we began in 2005 is continuing to pay off," John Faraci, International Paper chairman and chief executive officer, said. "We've steadily expanded our margins through internal cost controls and by focusing on the right customers and product segments within our key businesses. Our global investments are adding to revenue and profit growth and helping to offset some demand decline in North America." "Solid fourth-quarter results tell the same story," Tim Nicholls, chief financial officer and senior vice president, added. "Margins and volumes continue to improve, contributing to strong business earnings in paper, packaging and xpedx. Improved price realizations in the quarter helped offset the impact of continuing increases in raw material and distribution costs, but we expect continued input cost pressures in the first quarter of 2008. Uncertainty within the North American economy will also play a role in the first quarter, but we will continue to balance our supply with our customers' demand. Global demand for paper and packaging continues to look solid." The effective tax rate from continuing operations and before special items for the fourth quarter of 2007 is 31%, compared with 29% in the third quarter and 28% in the fourth quarter of 2006. The 2007 full-year tax rate is 30% compared with 29% for the 2006 full year. Effects of Special Items Special items in the fourth quarter of 2007 include a pre-tax charge of US$9 million or US$6 million after taxes, for charges relating to the company's transformation plan and an Ohio tax adjustment, well as a US$13 million pre-tax gain for adjustments to estimated gains/losses of production facilities sold. Additionally, a US$41 million net income tax benefit was recorded relating to the effective settlement of certain tax audit issues. The net after-tax effect of these special items is a gain of US$44 million. Special items in the third quarter of 2007 include restructuring and other charges totaling US$42 million before taxes, including US$37 million of pre-tax charges related to the closure of the company's Terre Haute, Indiana mill. Additionally, net pre-tax gains of US$8 million were recorded, principally to reduce estimated transaction costs accrued in connection with the transformation plan forestland sales in 2006, and a US$3 million increase to the income tax provision was recorded related to the settlement of a prior-year tax audit. The net after-tax effect of these special items is a loss of US$23 million. Special items in the fourth quarter of 2006 include a pre-tax gain of: -- US$4.4 billion from sales of U.S. forestlands included in the company's transformation plan; -- a charge of US$759 million for the impairment of goodwill in the company's coated paperboard and Shorewood Packaging businesses; -- a US$149 million pre-tax charge for losses on sales and impairments of businesses, including a US$128 million pre- tax impairment charge to reduce the carrying value of the fixed assets of the company's Saillat, France, mill to estimated fair value; -- a US$111 million pre-tax charge for restructuring and other corporate charges; -- a US$6 million pre-tax credit for interest received from the Canadian government on refunds of prior-year softwood lumber duties; and -- a US$5 million pre-tax credit for reductions of reserves no longer required. Restructuring and other corporate charges include: -- a US$34 million charge for severance and other charges associated with the company's transformation plan; -- a gain of US$115 million for payments received in the fourth quarter relating to the company's participation in the U.S. Coalition for Fair Lumber Imports; -- a charge of US$157 million for losses on early debt extinguishment; -- a US$40 million charge for increases to legal reserves, and a US$5 million credit for other items. In addition, a US$4 million tax expense was recorded in the quarter. The net after-tax effect of these special items is a gain of US$1.8 billion. At Dec. 31, 2007, International Paperhad total assets of US$23.96 billion, total liabilities of US$15.29 billion and total common shareholders' equity of US$8.67 billion. About International Paper Based in Stamford, Connecticut, International Paper Co. (NYSE: IP) -- http://www.internationalpaper.com/ -- is in the forest products industry for more than 100 years. The company is currently transforming its operations to focus on its global uncoated papers and packaging businesses, which operate and serve customers in the U.S., Europe, South America and Asia. The company has operations include, among others, facilities in Argentina, Brazil, Bolivia, France, Italy, Spain, Venezuela, and the United Kingdom. These businesses are complemented by an extensive North American merchant distribution system. International Paper is committed to environmental, economic and social sustainability, and has a long-standing policy of using no wood from endangered forests. * * * Moody's Investors Service placed International Paper Co.'s senior subordinate rating at 'Ba1' in December 2005. The rating still holds to date with a stable outlook. |
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