Earnings Reports for July 11

Paper Giant’s Profits Triple

International Paper Co., the world’s biggest paper and forest products company, today said its fiscal second-quarter net income more than tripled on higher pulp and paper prices and cost savings from recent mergers, beating analysts’ expectations.

Profits in the three months ended June 30 rose to $315 million, or 75 cents per diluted share excluding a $45 million charge after tax on facility closure and severance reserves following its takeover of Champion International. This compared to profits of $99 million, or 24 cents a share, in the year-ago quarter excluding extraordinary items. Revenues in the latest period rose about 12 percent to $6.8 billion from $6.0 billion in the year-ago quarter.

Analysts polled by First Call/Thomson Financial had forecast earnings of 74 cents per share in the latest quarter.

The company, which this spring agreed to acquire Champion International for $7.3 billion in cash and stock, has benefited from higher pulp prices and higher container prices in the quarter, analyst Mark Wilde of Deutsche Banc Alex. Brown. “For IP, the big horse is paper, and in this quarter, the big horse will be better than last quarter,” he said before the announcement.


Rite Aid Revises Results Lower

Cleaning up an accounting debacle that drove its stock down 70 percent, Rite Aid Corp. revised its 1997 and 1998 results lower by more than $1 billion.

The company, the nation’s third-largest drug store chain, also reported a wider loss in the fiscal first quarter and for the previous year.

The restated figures, released after the close of markets Tuesday, gave investors and analysts their first real look at the troubled company’s financial status since Rite Aid announced last fall it could no longer provide reliable profit forecasts due to accounting difficulties.

Rite Aid said its loss from the quarter ended May 27 came in at $238 million, or 92 cents a share, compared with a net loss of $44 million, or 17 cents, for the restated first quarter of the previous fiscal year.

Revenues for the first quarter of this year rose to $3.8 billion from a restated $3.6 billion in the same period last year.

Chief executive Robert Miller attributed the problems to the old management’s expansion program, which he said was “overly aggressive,” and said those problems should not continue under his management.

Miller said the next step for the company will be getting down to the basics to attract more customers.

“Now it’s Retail 101 — treat employees right, have a good advertising program, be in stock,” Miller said Tuesday night. “We expect to see good improvements in the third and fourth quarter.”

For 1999, Rite Aid restated its net loss of $1.1 billion, or $4.45 per diluted share, versus a restated net loss of $422 million, or $1.64 per share, for 1998.

Net income for 1998 was reduced by about $566.2 million, while the net income for fiscal 1997 was reduced by about $492.1 million.

In a conference call with analysts Tuesday, the company said it had met with vendors, sold off outdated merchandise and boosted marketing to become more competitive. That has resulted in improvements in same-store sales this year on both the East Coast and the West Coast, said Mary Sammons, president and chief operating officer.

Rite Aid, with more than 4,000 store locations in 30 states, has been rocked with difficulty after financial woes and accounting troubles sent the company’s stock tumbling by more than 80 percent, or $10 billion, in a year.

Former top executive Martin L. Grass was ousted Oct. 18, the day the company announced it was switching auditing firms. That came after company auditors at KPMG resigned, saying they had no confidence in the company’s management.

Since then, the U.S. Securities and Exchange Commission began conducting its own review of Rite Aid, and the U.S. Attorney’s office in Harrisburg reportedly was investigating the company for criminal fraud in connection with its past accounting practices.

A new team installed in December and led by Miller pledged stricter financial controls as part of its turnaround strategy. It recently secured a new financing pact, including $1 billion in secured credit, to give it breathing room to repay debt and pay expenses.

“We have a tremendous team and we have great people in the stores, modern stores and modern systems,” Miller said. “We have a big opportunity going forward.”

In a separate development, pharmacy benefit manager Advance Paradigm Inc. said Wednesday it would acquire Rite Aid’s PCS Health Systems Inc. unit for $1 billion.

Under the terms of the deal, Advance Paradigm will pay Rite Aid $675 million in cash and $200 million in senior subordinated notes for the PCS Health Systems unit, which serves as a middleman between health insurers and pharmacists. Advance Paradigm will also issue Rite Aid $125 million in new shares.

The boards of both companies have approved the deal, which is slated to close in the quarter ending Sept. 30, and is subject approval by the Federal Trade Commission and by certain of Rite Aid’s lenders. Following the acquisition, Advance Paradigm will be Advance PCS.


Yahoo! Reports Sharp Rise in Earnings

Internet media giant Yahoo! Inc reported unexpectedly sharp increases in second-quarter earnings and revenues as well as overall traffic to its Web properties. The company said its pro forma net income, excluding certain unusual items, totalled $74 million or 12 cents per diluted share in the second quarter, compared with $27.1 million or 5 cents cents per diluted share in the year-ago period. The latest earnings exceeded the consensus analyst forecast for a profit of 10 cents per share.

Yahoo also said that sales grew to $270.1 million from $128.6 million the year before, while page views rose to an average 680 million per day in June, up from 625 million in March.

“The unrivaled global distribution platform we have built for advertisers, merchants, content and service providers along with the diversified set of revenue streams we have created, positions us well to continue our leadership in the future,” Chairman Tim Koogle said.

The company said it now has 156 million unique users worldwide, including 20 million in Japan.

Yahoo shares rallied in after-hours trading after the earnings were released.

The stock had lost ground in recent days amid concerns that its earnings would reflect a sharp slowdown in its rate of growth, or that its revenues would reveal too strong a dependence on advertising from dot-com companies.

Yahoo did not provide much detail on the portion of its revenue that had come from advertising on its site.


The Associated Press and Reuters contributed to this report.