A couple of recurring themes run through this earnings season. Yahoo! (NASDAQ:YHOO) represents the return of online advertising spending. On the another hand, Microsoft (NASDAQ:MSFT) demonstrates both the strength of the consumer and continued weakness in corporate IT spending.

On Friday, USG (NYSE:USG), a highly cyclical maker of building products, came out with a different story: increasing revenues, but rising costs of energy and raw materials.

Monday morning, International Paper (NYSE:IP) took up this latest theme. The world's largest paper and forest products company reported that third-quarter net income declined 16% year over year to $122 million, even while revenues grew slightly to $6.37 billion.

Higher energy and wood costs hit IP's top two units the hardest. IP's Printing Papers unit saw operating earnings decline 33% to $120 million, while Industrial Packaging took a 13% hit. Including distribution, weaker demand also caused sales at the top three units -- which accounted for 79% of sales -- to decline 2.3%.

In other words, while IP has taken steps to cut costs internally, earnings have been hit by factors beyond its control.

And there were a few bright spots. Forest Products sales grew 7.4% to $800 million, while operating earnings rose 23% to $201 million. Sales at the 50.2% owned Carter Holt Harvey business also rose 18% to $590 million.

No doubt, weak demand hurts, and rising energy and raw materials costs don't help. But the bottom line is that IP is positioning itself to prosper when conditions improve. Management, which expects this theme to carry over into the fourth quarter, spies a general improvement in the economy in 2004.

Jeff Hwang owns shares of USG, and can be reached at [email protected].