Georgia-Pacific Reports First Quarter Results
Georgia-Pacific Corp. reported a first quarter 2003 net loss of $28 million ($0.11 diluted loss per share) compared with a net loss of $484 million ($2.10 diluted loss per share) in the first quarter 2002.
Excluding unusual items and the cumulative effect of an accounting change, the company's first quarter 2003 net loss was $9 million (4 cents diluted loss per share) compared with net income of $70 million (30 cents diluted earnings per share) before unusual items and the cumulative effect of an accounting change in the same period of 2002.
Unusual items in the first quarter 2003 included a pre-tax, asset impairment charge of $74 million ($47 million after-tax or 18 cents diluted loss per share) on tissue and pulp assets related to the closure of tissue manufacturing and converting operations at Old Town, Maine. Unusual items in the first quarter 2002 included a pre-tax loss of $14 million ($9 million after-tax or 4 cents diluted loss per share) due to a fire at the Crossett, Ark., tissue mill. Details regarding these unusual items and the cumulative effect of accounting changes are presented in separate disclosures at the end of this release.
In the first quarter 2003, Georgia-Pacific adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," resulting in an after-tax cumulative effect benefit of $28 million (11 cents diluted earnings per share) for the quarter. Effective in the first quarter 2002, Georgia-Pacific adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," and recorded an after-tax cumulative effect charge of $545 million ($2.36 diluted loss per share) for the quarter.
"Our first quarter 2003 results were negatively impacted by weak economic conditions in North America, higher energy and fiber costs, severe winter weather in the eastern United States and facility closures," said Pete Correll, chairman and chief executive officer. "However, near the quarter's end, our businesses began to experience improved conditions, which is encouraging for the coming periods."
Georgia-Pacific's net sales during the first quarter 2003 were $4.6 billion compared with $5.8 billion in the first quarter 2002, which included $1.4 billion from the Unisource paper distribution business, 60 percent of which was divested in the fourth quarter 2002. Debt at the end of the first quarter 2003 increased to $11.9 billion compared with $11.5 billion at the end of the fourth quarter, primarily due to increased working capital.
"Our North America consumer products business continues to operate in a very competitive marketplace. Shipments and retail prices lower than a year ago, combined with higher energy and fiber costs, contributed to the segment's results. We reduced our production by approximately 50,000 tons through downtime across our tissue manufacturing mills.
"In our international consumer products business, results were negatively impacted by lower shipments, but benefited from currency exchange rates and cost reductions.
"Our packaging business increased corrugated shipments by 4.7 percent from the same quarter a year ago. This compares favorably to the industry as a whole, which reported lower shipments for the quarter.
"Results for our bleached pulp and paper segment benefited from strengthening pulp prices as well as improved prices for Georgia-Pacific's branded, cut-size office papers.
"Prices were down from last year's first quarter for most building products. To help offset market conditions, we continued to balance production with demand by taking downtime in approximately 25 percent of our plywood business as well as substantial downtime in our lumber and particleboard facilities.
"We are looking forward to seasonal improvements in conditions for our building products businesses as the second quarter is traditionally the strong season for building materials demand. We also expect other businesses, including packaging, commercial tissue and Dixie, to show seasonal improvement in the coming months as economic conditions improve in those market segments.
"In addition, we continue to emphasize cost control across Georgia-Pacific and we are on target with our previously announced overhead reduction goals, which have been essential to helping offset rising pension and medical costs this year.
"Our asbestos liabilities and defense costs through the first quarter were generally consistent with our projection for all of 2003, and insurance recoveries during the quarter were in line with projections. The number of new claims filed against us during the quarter was about 10 percent higher than projected. While these additional filings are not expected to affect our 2003 projections, asbestos litigation remains very volatile, which could put upward pressure on our costs later in 2003. However, there were no developments during the quarter that changed our overall view of our asbestos liabilities.
"The first quarter provided extremely difficult circumstances, but we are beginning to see signs of strengthening in the business fundamentals. We will continue exercising operating and spending discipline across our businesses with the aim of delivering improved results in the coming quarters," Correll concluded.