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 fromrecent mergers, beating analysts’ expectations.

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

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

The company, which this spring agreed to acquire ChampionInternational for $7.3 billion in cash and stock, has benefitedfrom higher pulp prices and higher container prices in thequarter, analyst Mark Wilde of Deutsche Banc Alex. Brown. “ForIP, the big horse is paper, and in this quarter, the big horsewill be better than last quarter,” he said before theannouncement.

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Rite Aid Revises Results Lower

Cleaning up an accounting debacle thatdrove 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, alsoreported a wider loss in the fiscal first quarter and for theprevious year.

The restated figures, released after the close of marketsTuesday, gave investors and analysts their first real look at thetroubled company’s financial status since Rite Aid announced lastfall it could no longer provide reliable profit forecasts due toaccounting 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 $44million, or 17 cents, for the restated first quarter of theprevious fiscal year.

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

Chief executive Robert Miller attributed the problems to the oldmanagement’s expansion program, which he said was “overlyaggressive,” and said those problems should not continue under hismanagement.

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

“Now it’s Retail 101 — treat employees right, have a goodadvertising program, be in stock,” Miller said Tuesday night. “Weexpect 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 $422million, or $1.64 per share, for 1998.

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

In a conference call with analysts Tuesday, the company said ithad met with vendors, sold off outdated merchandise and boostedmarketing to become more competitive. That has resulted inimprovements in same-store sales this year on both the East Coastand the West Coast, said Mary Sammons, president and chiefoperating officer.

Rite Aid, with more than 4,000 store locations in 30 states, hasbeen rocked with difficulty after financial woes and accountingtroubles 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 daythe company announced it was switching auditing firms. That cameafter company auditors at KPMG resigned, saying they had noconfidence in the company’s management.

Since then, the U.S. Securities and Exchange Commission beganconducting its own review of Rite Aid, and the U.S. Attorney’soffice in Harrisburg reportedly was investigating the company forcriminal fraud in connection with its past accounting practices.

A new team installed in December and led by Miller pledgedstricter financial controls as part of its turnaround strategy. Itrecently secured a new financing pact, including $1 billion insecured credit, to give it breathing room to repay debt and payexpenses.

“We have a tremendous team and we have great people in thestores, modern stores and modern systems,” Miller said. “We havea 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 RiteAid $675 million in cash and $200 million in senior subordinatednotes for the PCS Health Systems unit, which serves as amiddleman between health insurers and pharmacists. AdvanceParadigm will also issue Rite Aid $125 million in new shares.

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

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Yahoo! Reports Sharp Rise in Earnings

Internet media giant Yahoo! Inc reported unexpectedly sharp increases insecond-quarter earnings and revenues as well as overall trafficto its Web properties. The company said its pro forma net income, excluding certainunusual items, totalled $74 million or 12 cents per dilutedshare in the second quarter, compared with $27.1 million or 5 cents cents per diluted share in the year-ago period. The latestearnings exceeded the consensus analyst forecast for a profit of10 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 anaverage 680 million per day in June, up from 625 million inMarch.

“The unrivaled global distribution platform we have builtfor advertisers, merchants, content and service providers alongwith 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 usersworldwide, 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 amidconcerns that its earnings would reflect a sharp slowdown in itsrate of growth, or that its revenues would reveal too strong adependence on advertising from dot-com companies.

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

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The Associated Press and Reuters contributed to this report.